The United States plans for a national conversation on CBDC (Central Bank Digital Currency).
That comes after multiple nations have experimented or launched early CBDCs versions. Why is this move by central banks vital to the economy? Well, the underbanked population will solve their fiscal needs with ease. Moreover, the currencies will ensure more efficiency in monetary and banking policy.
On Wednesday, the Senate Banking Committee (SBC) held a CBDC meeting, chaired by Sen. Elizabeth Warren.
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The Federal Reserve will release a statement in the coming month, expressing its thoughts on the digital dollar currency.
How will the CBDC work? Firstly, this is a digital currency of the dollar. With that, its value will not change vs. the dollar – since it is a form of the dollar.
In other words, central bank digital currencies are digital types of existing coins issued, backed, and governed by a central bank.
For that reason, CBDCs would serve as legal money, unlike BTC. What benefits will that bring? It will increase innovation payments rates, reduce banking costs, and more people would access banking services.
Moreover, Federal Reserve would achieve increased precision over funds supply. Also, lawmakers would distribute administration assistance programs like food stamps and social security to more underserved individuals.
Also, a Unites States CBDC can help maintain the international prevalence of the USD.
However, some drawbacks exist. For instance, the traceability of virtual payments is a concern. Cash anonymity ensures privacy.
Securing financial data from thousands of individuals could be challenging.
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Also, financial institutions fear that banks would lose some part of their deposits.
Darrell Dufffie, a Senate session witness, said that he is not sure about the necessity of CBDCs.
According to April reports by PwC, over sixty central banks have considered central bank digital currencies since 2014. Also, the source indicates that Federal Reserve has been less active in the digital currency than several reviewed central banks.
For now, Mainland China citizens are on the trial of Digital Yuan. Also, the Bahamas are active with the Sand Dollar digital asset.
From the above report, what do you think about US CBDCs adoption? Comment your thoughts below.
