Recently, many countries around the world are scrambling to carry out digital currency research, and some countries such as China, France, Japan, and the Bahamas have joined in, but the United States has not yet made a statement on its CBDC. However, it can be seen that in the second half of the year, the number of countries accepting CBDC pilots and development has increased day by day. With the development and spread of CBDC, the Bank for International Settlements (BIS), the International Monetary Fund (IMF) and the World Bank have jointly called for global central banks. CBDC for cooperation. BIS said it will fully promote the development of CBDC as a way to modernize finance and ensure that "tech giants" do not control the currency.
This is an urgent task, but it is also quite difficult. What exactly is CBDC, and how can it have such a large influence, so that countries around the world are competing for development, but they are afraid?
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What is CBDC
At present, the full name of CBDC can be understood as [Central Bank Digital Currency], the central bank digital currency does not specifically refer to [Chinese Bank Digital Currency], so any country can research and issue its own CBDC, and the naming method is The lowercase letter e- plus the abbreviation of the national currency, such as China's digital renminbi is e-CNY.
In fact, there is no specific definition of what a CBDC consists of - the term is used to describe many concepts. It may be misleading to simply define it as the central bank's digital liabilities, because the central bank has digitally provided legal tender to commercial banks for interbank payments and as a store of value through the central bank's reserve accounts. The Bank for International Settlements (BIS) defines a CBDC broadly (though imprecisely) as "a digital form of central bank money that is distinct from traditional reserve or settlement accounts".
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How to apply CBDC
Currently, CBDC is still in the state of being researched and developed. Different countries have different starting points and purposes of issuing CBDC, and the use scenarios of CBDC are also very different. According to the recent papers on CBDC published by the Bank of Canada, The application of CBDC is very important to reflect the following aspects:
A necessary condition for successfully initiating and sustaining the adoption and use of a central bank digital currency (CBDC) is to ensure that the CBDC has a clear niche in the payments space.
One possible approach is to design CBDC as "enhanced cash" to reduce the cost of carrying and handling cash and enable electronic transfers while retaining the unique desirable characteristics of cash.
Desirable design features of a CBDC include universal accessibility, transparency and low per-transaction fees, high levels of privacy, and robust offline functionality.
Due to network effects, sustained adoption and use of CBDC as a person-to-business (P2B) payment method will occur if and only if both consumers and merchants benefit from the status quo. Enabling the P2P (people-to-person, P2P) function helps to capture consumers and promote the use of P2B.
In addition, CBDC is also one of the most potential applications. Distributed ledger technology (DLT) mainly uses the characteristics of decentralization and non-tampering of blockchain technology to help users quickly and efficiently liquidate funds, which can save time and cost, and make the relationship between users and users trust between. Using blockchain technology to create a point-to-point payment method, excluding the intermediate links of third-party organizations, not only can pay all-weather, instantly arrive, easy to withdraw cash, and have no hidden costs, it meets many convenience needs.
At the same time, in order to meet the consumer market and meet the needs of P2B transactions, both merchants and consumers can benefit from switching to CBDC to achieve the successful adoption and use of P2B payments. An area where cash like a CBDC could appeal to both consumers and merchants, provided the other party is willing to accept or use it. Payment method adoption involves network effects. For consumers, the benefit of adopting a new payment method increases if more merchants accept it.
And vice versa, merchants benefit when more consumers use new payment methods. A CBDC that supports offline transfers could complement existing payment methods that are sensitive to power outages and network outages. Credit card payments require an internet connection to verify credit card information. When payment systems go down due to power outages or internet failures, it creates inconvenience for consumers. For merchants, the stakes can be even greater as they risk losing sales and customers. Even if it is possible to read a debit or credit card offline and store transaction data, the actual card processing is only possible when the connection is restored.
Therefore, accepting credit cards offline is risky. The emergence of CBDC is not to replace the original payment method, but more to fill the gap in the current payment field, especially in the case of the development of a cashless environment, it will coexist with other payment methods to make the payment system more sound and efficient. In the future development, with the joining of more countries, CBDC will inevitably produce more and more optimized application scenarios, not limited to this
In this way, it seems that the development of CBDC is beneficial and harmless. Why is the United States still not taking any action? As we mentioned earlier, because various countries have different starting points for issuing CBDC, which leads to differences in application scenarios. The United States also has its own characteristics. Whether to issue a CBDC requires Congressional approval, and when Congress may reconsider its policy approach to a CBDC, it faces a series of policy issues and considers whether there are specific policy issues that can be solved by a digital dollar, and if so, which How will it affect the design of digital currencies.
Congress is also likely to consider how to weigh the various benefits, costs, and uncertainties of a digital dollar and how to build consumer trust in digital currencies in terms of privacy and cybersecurity. Congress may also consider how to cover the cost of developing a new digital currency. The purpose of issuing CBDC in other small countries is more for other reasons such as de-dollarization or debt transfer, but due to the status of existing digital currencies in the United States, the issuance of CBDC will inevitably have an impact on the existing encryption market. The domestic economic environment in the United States is not a risk that can be easily determined.
