CBDC Explained: Pros and Cons of CBDCs - YouTube

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“CBDC” stands for Central Bank Digital Currency.  

CBDCs are developed on centralized blockchains  

by governments who wish to maintain full control  over the network. 

Many governments have already  

been moving toward ‘cashless’ societies, but  the global pandemic has quickened the transition  

from a manual to a digital world. 

According  to a new CBDC tracker from The Atlantic Council,  

83 countries — making up over 90% of the world  economy, are exploring CBDCs. 

5 countries have  

already launched their own digital currency, all  of them being Caribbean tax havens, who perhaps  

want to safeguard against the prospect of economic  sanctions. These are Grenada, The Bahamas,  

Saint Lucia, St Kitts and Nevis, and Antigua /  Barbuda. 

Another 14 states, including China,  

are currently testing pilot versions of their own  digital currency.

The centralized, government  

controlled Digital Yuan is seen as a key  development. It will help the Chinese government  

streamline international trade with countries and  organizations that are signed up to the ambitious  

Belt and Road Initiative.

Other nations that are  currently in the testing stage include Sweden,  

South Korea and Thailand, which is working on a  “Multiple Central Bank Digital Currency Bridge”  

in partnership with China and the United Arab  Emirates. 

And then there’s oil-rich Bahrain,  

which is still in the research stage, has  chosen to actually  partner with corporate  

banks such as JP Morgan to patent their own  original system of cross-border payments,  

which will be settled in US dollars. 

The United  States is also still in the research phase,  

with the Boston Fed and researchers at MIT tasked  with figuring out how to make a digital currency  

that is fast, secure and resilient,  and basically good enough to fulfill  

the needs of the world's largest economy.   
 So let’s discuss some of the potential benefits  

of CBDCs. 

Paying a friend who lives in the  same country as you will only take a few seconds,  

and the same might be true of friends that live in  different countries. . Cross border payments have  

the potential to be settled instantly, and with  a minimal fee.

Compare that to today’s  reality,  

where some of the world’s poorest people  are still reliant on payment intermediaries  

like Western Union, which take fees of up to  10%. Fees would also be reduced drastically for  

merchants, who will be able to circumvent credit  card processing fees. This would be good news for  

both small and large businesses. 

CBDCs also  promise efficient stimulus payment delivery.  

The COVID-19 pandemic highlighted this  weakness in the U.S. financial system,  

when the government struggled to deliver  stimulus checks quickly. Those in need of  

financial relief were often found to be at the  end of the line, due to their lack of access to  

financial services. 

Assuming that access to  digital state money will only require a phone,  

CBDCs could make it easier for governments  to provide targeted welfare payments.  


Centralized government currencies can effectively  be “tagged” to make them valid only for purchasing  

certain goods, like food. The same principle can  be applied to ensure that foreign aid reaches  

the people who need it most, instead of being  squandered by inefficient or corrupt governments.  



But to most crypto enthusiasts, the idea of  having a centralized cryptocurrency that hands  

power back to world governments (and the banks  that sponsor them) is a pointless exercise at  

best. 

One of the obvious downsides of CBDCs  is that governments will still be able to freeze  

individual accounts, reverse transactions, and  prevent people from spending their money on things  

like Bitcoin, which may be seen as an unwanted  competitor.  Governments will also have access  

to an unprecedented amount of financial data.In  the case of countries that indulge in serious  

oppression and human rights violations, this  centralization of data could lead to very grave  

consequences. 

Another danger of a centralized  blockchain is total loss of funds, as the keys  

and data are  held in one single place. This  means One successful hack, say, from a competing  

government with a strong cyber warfare team, could  be disastrous.

And digital currency holders could  

still suffer the effects of inflation. Minting new  digital dollars for further bailouts and economic  

stimulus will see the purchasing power of the  currency decline, just like it has with the US  

dollar.

However the future of cryptocurrencies  plays out, CBDCs will likely be a part of it,  

for better or for worse.  

The digital economy  will almost certainly become a multiverse of  

centralized and decentralized blockchains,  some of which will host hundreds of different  

cryptocurrencies and utility tokens.

After a run  of thousands of years, we are living in an era  

which will see the final shift away from physical  currency. 

Arguments for and against Bitcoin and  

CBDCs tend to become political, but in reality,  it all comes down to trust. Which currencies  

are you likely to trust more? Decentralized  currencies like Bitcoin or government currencies?  

Let us know your pick in the comments and  why. 

Thank you for watching! If you found  

this content useful, don’t forget to like and  subscribe for more crypto videos from Exodus.