CBDC or Central Bank Digital Coin updates, facts that crypto can no longer be avoided. It will soon become every man’s asset for daily use.
CBDCs or central bank digital coins, issued and regulated by the central monetary authority of a country, is the tokenized digital version of a fiat currency of an economy. Although no country has yet launched one, many of the leading economies of the world are moving towards implementing CBDC in the recent future. For instance, China has been pushing towards a digital Yuan. Sweden, in its strive towards a cashless economy, has also been inching closer towards e-Krona, a digital version of their fiat currency that would be regulated by Riksbank, Sweden’s central bank. The list of other countries that are also working towards the adoption of a central bank digital coin includes Canada, Uruguay, Thailand, Venezuela, Singapore, Russia, etc.
Global Payments and the Role of Central Banks
Digital innovations are driving radical shifts in the world of payments. According to the latest available market estimates, the global market size of digital payments is set to experience a double-digit growth rate between 2020 and 2025. The market is expected to reach a value of $154.1 billion in 2025 from $79.3 billion in 2020.
In this rapidly growing market, it is incumbent upon the central banks to look after the safety and integrity of the payment system and maintain the stability of money and payments. One way for central banks to carry out their job effectively, especially in the current scenario of pandemic-strained economies, is to participate in the system themselves. Instead of trying to regulate the world of payments, it is more reasonable and efficient that the central banks participate in the system themselves.
The inclination of the central banks towards introducing a centralized digital currency system has been on the rise specifically since 2019. This favourability towards the issuance of wholesale and retail CBDCs has been driven by many factors. In a 2019 survey, 66 central banks thought that the primary reason for introducing CBDCs was to ensure the safety and efficiency of domestic payments. For the central banks of some developing economies, inclusion was the key driver behind the adoption of CBDCs.
The central bank digital currencies can serve as a baseline for the digital payment system to evolve maturely. The participation of a central bank would encourage competition among the non-government players. It would also set the standards for safety and risk management protocols.
With all these factors already at play, the shrinking volumes of person-to-person cash transactions and the subsequent rise of e-payments across the world turned the idea of CBDCs into a potentially shapeshifting paradigm.
Crypto: For One and For All
In the United States, anywhere between 5 and 8 percent of the population already owns cryptocurrencies. For Spain, the number is even higher. Almost 10% of the population holds cryptocurrency in Spain. In Turkey, almost 20% of the population owns cryptocurrency. The countries of Russia, Denmark, the UK, and Italy have a higher percentage of the population holding cryptocurrency than the United States.
The adoption of cryptocurrency has been expanding like never before. Coinbase, one of the leading exchanges of cryptocurrency, has more than 30 million users. Another reputed exchange, Binance, has anywhere between 12 and 15 million users. Each day about 0.5 to 2 million active users trade in some way or another at the Binance exchange. Like Coinbase and Binance, there are several other crypto-exchanges in the world including Kraken, Bitstamp, Bitfinex, Bittrex, Huobi, and OKEx. From these numbers, we can get a fair estimate of how many crypto-users are there in the world.
All these data lead to one fact: crypto can no longer be avoided. It will soon become every man’s asset for daily use.