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CBDC - United State's Push for Central Bank Digital Currency And The Challenges

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coolguy123
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Hello Friends,

Central Bank Digital Currency (CBDC) is making more news than before as the World's most technologically powerful and innovative economy of United States of America has finally pushing it hard to have state's own CBDC soon with the Fed releasing a 35 page discussion on the benefits of a digital currency.
The Central Bank of US is not gonna approve the CBDC and bring it to public unless it gets an approval by the White House and Congress and the recent discussion with Congress shows that, they are also in favor of a digital currency.
The US will not be the First to bring a CBDC and it is not going to be the last as well with more than 100 countries are in talk of bringing their own CBDC's and we already have about 9 countries with CBDC's launched and as many as 14 are running pilot projects on this with another 16 in development and not to forget there about 40+ doing a research on CBDC's.
The countries which are already having CBDC's launched include The Bahamas, Nigeria along with 7 Caribbean countries of Antigua and Barbuda, Saint Kitts and Nevis, Montserrat, Dominica, Saint Lucia, Saint Vincent and the Grenadines and last being Grenada.
The Nigeria is the latest to have it's CBDC recently in October 2021 and interestingly it is said that, the US Federal Reserve Board is looking up to Nigerian CBDC to understand the pros and cons of CBDC and Fed's recent publication released on this Thursday says that, it is open for discussion from public until May this year so that, they try to understand what public feels about US CBDC and take a decision after that. So, we can assume the US is taking this up as a pilot project and will have research and study before making it official.

The need for CBDC:

The growing investments into Cryptocurrencies is something that is pushing for different countries to have their own CBDC's in order to counter the devaluation of their national currency as the Cryptos are becoming more and more popular.
So, the Governments wants to have their own Cryptocurrency or as is the official word Digital Currency so that, they can still have control over the fiat in digital form and popularize it.
While so far so good with regards to creation of CBDC and using it in Nigeria and other countries mentioned above.
But, there comes some challenges which are something Fed wants to study and here are some of those based on what e-Naira has been facing.

The Challenges:

Source

The implementation of CBDC will have it's own challenges as the data has to be transmitted thru electronic mode and we are already having existing issues like cyber crimes, scamming and all and here are few of those which will need to be mitigated before having a successful CBDC implementation:
  • Avoiding accounts getting compromised due to existing cyber security issues/weaknesses.
  • Scalability in terms of growing number of transactions as the existing Cryptos are facing issue with the same.
  • Global level regulations of CBDC are key to have cross border transactions and a framework is needed for that.
  • To not to intrude to the privacy of people's data as the CBDC requires having all the details of the remitter and receiver to be tracked and violates privacy policy.
  • Challenges with regards to pegging the cost of transmitting the CBDC or what we call as commission.

    • The growing research and pilot projects around the globe on CBDC shows the interest by different countries to utilize the benefits of CBDC's in an order to stop the fiat currencies getting less popular and to pose a challenge to private cryptos.

    But, the CBDC implementation itself will have more bigger challenges and with a global framework, the challenges can be addressed in a better way.

    That's all I wanted to write in this blog. I hope you liked this content, do you? Do leave your comments.

    Thanks and Have a good day :)

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