What is a central bank digital currency, or CBDC central banks are debating whether or
not to issue their own digital currencies to the general people dubbed central bank
digital currency, or CBDC only a few IMF member nations have issued CBDs or conducted comprehensive
pilots are testing while the bulk of VMF member countries are actively examining CBDs. But
what exactly are the central bank digital currencies? And do they have anything to do
with cryptocurrencies? Hey, everyone, welcome to crypto trends
In today's video, we'll talk about central bank digital currencies. So make sure to subscribe
to the channel so you don't miss out on any of our videos. So without further ado, let's
get into it. What is a central bank, digital currency or CBDC central bank? Digital currencies
are digital tokens. Similar to cryptocurrency issued by a central bank. Their based on the
value of the country's Fiat currency CBD CS are being developed in a number of nations
and some have already adopted them because so many countries are looking into how to
make the switch to digital currencies. It's crucial to grasp what they are and what they
signify for society. Understanding CBD CS, government issued currency that is not backed
by a tangible commodity, such as gold or silver is known as Fiat money. It is a type of legal
money that can be used to buy and sell goods and services.
Fiat money was traditionally issued in the form of bank notes and coins, but technological
advancements have enabled governments and financial institutions to supple physical
Fiat money with a credit based model in which balances and transactions are digitally recorded.
Physical cash is still extensively exchanged and acknowledged. However its use has declined
significantly in several affluent countries. And this trend has increased during the COVID
19 pandemic. The rise of cryptocurrencies and blah Lockchain technologies has heightened
interest in cashless societies and digital currencies. As a result, governments and central
banks around the world are investigating the use of government backed digital currencies.
These currencies like Fiat money would have the full faith and backing of the government
that issued them. If, and when they are adopted goals of central bank, digital currencies,
many people in the United States and many other countries do not have access to financial
services.
Only 5% of adults in the United States have a bank account. A further 13% of adults in
the United States have bank accounts, but use costly alternatives such as money orders,
payday loans, and check cash services. CBD C's major purpose is to provide privacy, transferability,
simplicity, accessibility, and financial security to businesses and consumers CBD CS could also
minimize the expenses of maintaining a complicated financial system, lower cross border transaction
costs and provide lower cost options to people who currently use alternative money transfer
methods. Digital currencies issued by central banks would also minimize the dangers associated
with utilizing digital currencies in their current form. Crypto CS are extremely volatile
with their value fluctuating continuously. This unpredictability might put many households
in financial distress and jeopardize an economy's general stability. C BDCs would provide a
stable means of exchanging digital currency to households, consumers, and companies. If
they were backed by a and supervised by a central bank types of CBD CSCs are divided
into two categories, wholesale and retail.
Financial institutions are the primary users of wholesale CBDs, consumers and businesses
use retail CBDs in the same way they use actual cash. Wholesale CBD CS holding reserves in
a central bank is similar to holding wholesale CBDs. The central bank establishes an account
for an institution to deposit funds or settle. Interbank transfers. Central banks can then
affect lending and set interest rates through monetary policy tools like reserve requirements
or interest on reserve holdings, retail CBD, CS, consumers, and businesses use retail CBDs,
which are government backed digital currencies, retail CBD CS reduce the possibility of private
digital currency issues going bankrupt and losing their consumers money, individual users
access and use their cash in different ways. Following are two of them. Token based retail
CBDs are accessible with private and public keys. This method of validation allows users
to execute transactions anonymously account based retail CBDs require digital identification
to access and account issues.
CBD CS address and issues need to be addressed. Although C B D C addresses a number of concerns.
There are some hurdles that must be overcome before one can be properly designed and implemented.
So let's take a look at the issues C BDCs address and issues that need to be addressed.
Issues addressed by C B CS free from credit and liquidity cross border payment improvements
supports the international role of the dollar financial inclusion expands access to the
general public issues that need to be addressed. Financial structure changes, financial system
stability, monetary policy influence, privacy and protection, cyber security in shoes. A
C B D C. Address is explained a CBDC eliminates the danger of third party occurrences such
as bank collapses and runs. The central bank is responsible for any remaining risk in the
system. High cross border transaction costs can be reduced by simplifying distribution
networks and strengthening government to government collaboration.
The dollar remains the world's most widely used currency. A CBDC in the United States
might help the country maintain its leading position removes the expense of putting in
place a financial framework within a country in order to provide financial access to the
unbanked CBD CS can create a direct link between customers and central banks obviating the
need for costly infrastructure issues that need to be addressed explained in the case
of the United States, the financial structure of the country could shift dramatically. Same
is true for other trees as well. It's unclear how a change would affect household spending
investments, banking, reserves, interest rates, the financial services industry or the economy.
The impacts of switching to C B D C on the stability of a financial system are uncertain
during a financial crisis. For example, there may not be enough central bank liquidity to
withdrawals. Monetary policy is used by central banks to impact inflation interest rates,
lending, and expenditure.
All of which affect employment rates central banks will have to make sure they have the
instruments they need to affect the economy in a favorable way. One of the most important
drivers of cryptocurrencies is privacy CBD CS would necessitate a reasonable level of
government intrusion to monitor for financial crimes. Monitoring is also vital since it
aids efforts to prevent money laundering and terrorism financing cryptocurrencies have
been the target of hackers and thieves on multiple occasions as has been seen a central
bank issue. Digital currency would undo, attract the same type of criminals, necessitating
major efforts to avoid system penetration and theft of assets and information C BDCs
versus cryptocurrencies. Cryptocurrency ecosystems offer a glimpse of an alternative financial
system in which transaction terms are not dictated by honors rules. They're difficult
to comp for your forge and they're protected by consensus processes that prevent manipulation.
On the other hand, digital currencies are related to cryptocurrencies, but do not necessarily
require blockchain technology or consensus procedures. Cryptocurrencies are also decentralized
and unregulated investor attitudes, usage, and user interest, all info and they're worth.
They are speculative assets that are more volatile making them unsuitable for use in
a financial system that requires stability. On the other hand, CBD CS are supposed to
be stable and safe by mirroring the value of Fiat currency. Final thought. It's true
that CBD CS have already been launched in a few countries, including The Bahamas Antiga
and Barbuda St kits. And nevi Montserrat doin St. Lucia St. Vincent and the grine Grenada,
and even Nigeria, even more, several countries such as the United States, India, Sweden and
Jamaica are investigating them. This means that they can possibly be the future of money
and a lot bigger than the current crypto market. So what are your thoughts about central bank
digital currencies and can C BDCs be the future of finance? Please let us know your opinions
in the comment section down below with that being said, here we come to the end of our
video. I hope you like this video. And if so, then don't forget to subscribe to the
channel. So you never miss any video, see you in the next video till then take care.
Thanks for watching.