Central bank digital currencies (CBDC)

Basics

• These are projects of governments who try to have their own digital currency. Most of these are heavily centralized and therefor do not bring anything innovative.
• From Cointelegraph (9-9-2020):

"Dutch fintech-focused non-profit think tank dGen released a report devoted to geopolitical trends of CBDCs on Sept. 9. As such, dGen predicts that three to five nations globally will completely replace their national currency with a CBDC in ten years. While dGen does not make an exact guess at which countries will make the switch by 2030, the report outlines significant progress in CBDC by jurisdictions like the Bahamas and Sweden. The think tank noted that Sweden’s e-krona development comes in line with the country’s plan to go cash-free by 2025."

Pros and Cons

Pros

• From Daily Gwei (2-11-2020):

"If CBDC’s make their way on to public blockchains, it basically cements them as critical financial infrastructure for the world and the speed at which they’re integrated into global finance will accelerate tremendously. This would then give people a choice - use a CBDC or use a decentralized alternative like DAI - each comes with their own trade-offs."

Cons

• As this blog puts it (28-9-2020):

"It’s going to be a disaster for your privacy. The governments will monitor, track, and record every single transaction you make. Through the CBDC, the government has the ability to approve or deny any of your transactions. CBDC can make negative interest rates enforcible to everyone. The government could just deduct interest from your digital wallet. And on top of all that, the government will never cease to increase the digital currency supply."

Notable Projects

• DC/EP is the Chinese version, and it seems to become the first CBDC to be launched in a big country.
• From Daily Gwei (2-11-2020):

"The Federal Reserve in the U.S. has been talking about it, the European Central Bank has been talking about it, China is already conducting pilots and just yesterday the Reserve Bank of Australia (RBA) partnered with 2 of Australia’s largest banks to start research for an Ethereum-based CBDC."