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However, there are also disadvantages associated with a decentralized payment system. The benefit of cost savings may be exaggerated, as operating a network on a large scale can entail huge maintenance costs. Also, the Bitcoin payment system has repeatedly been subjected to technical failures and serious security breaches in its short history.
This begs the question, do we even need to implement and distribute CBDCs? We asked the experts what is more: the pros or cons of the transformation of the centralized payment system.
CBDC is the inevitable future of the financial system
As you know, progress cannot be stopped. Whether we like it or not, work on the development of digital currencies of central banks is already underway, which means that their mass distribution is only time. Some experts adhere to the position that one should not look for pros or cons in these transformations. You just have to accept the existence of the CBDC as a fact.
Andrey Krupnik, director of the consulting company SPS Legal, believes that countries are interested in implementing CBDCs, as their use will reduce the number of intermediaries, increase the speed of transactions and reduce the overall cost of making payments.
At the same time, the expert noted that CBDCs will not become a competitor to cryptocurrencies, no matter whether centralized or decentralized: they have different functions, and, most importantly, different sources. Modern cryptocurrencies, including stablecoins, are for the most part an instrument of investment, accumulation or payment (especially in the last couple of years), including cross-border ones. In turn, CBDC is a tool that allows the Central Bank to reduce the cost of issuing funds, and on the infrastructure for conducting fiat payments. Investing in a CBDC is essentially equal to investing in the fiat currency of the issuing country, nothing more.
That being said, CBDCs won’t have a devastating effect on the economy. Governments of all countries should be interested in ensuring that digital currencies complement, and not replace, money and financial services of the private sector.
They will become an important contribution that can be used to create all sorts of financial products for individuals and companies. Thus, CBDCs will coexist with both cash and existing forms of electronic money and cryptocurrencies, rather than replacing them.
Ivona Gutovich, COO of Green Crypto Processing, in turn, noted that the digital currency is attractive because, first of all, it will help the government in macroeconomics:
“For development and economic management, it is now important to enter a controlled digital world, let’s say. One of the competitive features is the digital yuan and its growth and development growth will certainly significantly increase the regulatory risk for all cryptocurrencies.
It should be understood that the growth and dominance in the cryptocurrency infobox depended directly on the bitcoin rate. CBDCs are likely to be as important to our economic future as independent cryptocurrencies. And the growth in the number of CBDCs, of course, will increase the tightening of state restrictions on any other cryptocurrency.
The most important difference between the CBDC is that the digital currency model is legal tender, which is guaranteed by the governments that directly implemented it.”
CBDCs are a reality, and most importantly, it is the dominance of all forms of digital currencies in the near future. The fact is that at the moment many countries are already engaged in the introduction of digital innovations.
Chen Limin, Chief Financial Officer and Head of Trading Operations at ICB Fund, is also considered to beThere is no clear answer to the question of what CBDC implementation will bring. According to the expert, this is an experiment, the course of which will be set by many circumstances, the results of which will appear in the future. In part, the creation of digital currencies was the reaction of the authorities to the popularization of cryptocurrencies, the threat of loss of monetary sovereignty in the face of sanctions or the potential strengthening of the power of technology giants (Libra from Facebook). In many ways, the beginning of research in this area was more of a forced than a conscious step. The world is changing, and quickly, the authorities are forced to react. Procrastination is fraught. Even for the dollar, which could take a hit to its hegemony by launching a digital yuan, which is not unreasonable given the scale of China’s foreign trade. According to the BIS, CBDC projects are conducted by every four out of five central banks in the world, the organization directly called them the basis of the monetary systems of the future. The interoperability of national digital currencies (Inthanon-LionRock, Dunbar and Jura projects) is already on the agenda. In other words, the emergence of CBDC is inevitable.
Positive aspects of CBDC implementation
There is no denying the benefits of implementing A CBDC. The emergence of digital currencies of central banks can really help solve a number of problems that exist in the modern financial system. Experts spoke in detail about the advantages for both the state and ordinary users.
Olga Ilyina, head of the expert team of the Blockchain Technologies Laboratory “ChainLab” of the scientific center “Idea”, believes that the introduction of CBDC will have a positive impact on the development of the economy as a whole. Studies of central banks show that the development of the retail model of CBDC (simplified – digital money for all) will increase the efficiency of retail payments by reducing the number of intermediaries. In turn, the introduction of a wholesale CBDC (digital money for banks) model will accelerate cross-border payments. Settlements between banks from different jurisdictions can be carried out in real time. It is also important to note that the CBDC model is a new concept, pilot versions of which are only being tested by central banks. At the same time, the expert noted that before proceeding to the real implementation of this model, states will have to solve a number of regulatory and legal problems, including from the point of view of protecting and preserving the confidentiality of personal data.
Anti Danilevskiy, CEO and founder of Kick Ecosystem, put it this way:
“The main advantage of CBDC is that it is a clear, simple, transparent and controlled form of cryptocurrency. If you are a law-abiding citizen, there is nothing to fear. If you evade taxes or pay with the help of CBDC prohibited substances, then, of course, there is something to fear. Another question is how democracy relates to the control of the means of 🙂 The answer is more of a smile.”
Georgy Galoyan, founder and CEO of DAO.vc, highlighted the following advantages of introducing CBDC into the modern economic system:
- Regulators will have the right to monitor and block suspicious transactions, which means that laundering money or stealing it from the account will become much more difficult, if not impossible;
- We will all get rid of the need to pay the banks. For example, from each transaction of fiat money, the bank takes a commission from 3% to 10%. The use of blockchain technologies to create a CBDC will actually reduce the cost of transactions at times;
- Virtual money is harder to lose, forget, steal, which means that these cases will definitely become less;
- The speed of payments will increase. Sending money from one end of the country to the other will be possible in a few seconds. Users don’t even have to go to the bank to receive the transfer. Digital currencies will be credited directly to the virtual wallet;
- The state will save millions of rubles for the issue and maintenance of paper bills and the minting of coins.
Yaroslav Yarutin, a defender of the rights of crypto enthusiasts, emphasized that the introduction of CBDC profoundly transforms the money circulation, which is correct and natural.
Full digitalization of money will lead humanity into the era of safe and fair economic exchange, minimize unfair behavior in the market and free society from imposed restrictions.
Oleg Fakeev, the founder of the Telegram channel “Whales of Investments”, is confident that state regulation will not hit the market hard, but on the contrary. Regulation will give a more formal look to the market, which will attract more investors to the market. This means that more projects will be built, there will be more money on the market. All this will reduce the volatility of the crypto market, which is of course a minus. But along with this, the scam projects will go away, because there will be regulation. And ordinary investors will have at least some security, which at the moment does not exist.
The expert also added:
“This is an undoubted plus for the market, which not so long ago was an “ordinary bubble”, and now the world authorities are seriously discussing how to regulate exchanges, projects and investors. That gives confidence in the crypto market. Well, we, experienced investors, are left with the last years of a truly volatile market. Also, with the growth of the market volume, it is more difficult for projects to grow, therefore, there will be no such things.”
Analyst Aziz Kenzhaev believes that the digital currencies of central banks have more pluses than minuses:
“It will be easier to pay, to transfer funds abroad. Anyone involved in cryptocurrency investment or trading will be given the opportunity to trade cryptocurrency against the local digital currency. The central bank’s digital currency should be a great substitute for stablecoins.”
Vladimir Gorgadze, head of the Master’s program “Blockchain” at MIPT, co-founder of the tokenization platform Atomyze and the IT company Newity, highlighted the obvious advantages of introducing a new form of money: the speed of transactions increases, their security increases, their cost decreases, which can ultimately be beneficial for consumers, the convenience of conducting financial transactions increases, and the state has more tools for effective monetary and fiscal conduct. politician. All this, when skillfully used, leads to the growth of the economy and, ultimately, the well-being of the population.
The disadvantages associated with risks are offset by a balanced legal system. At the same time, the expert noted that the existing forms of money will not disappear at once after the introduction of digital money, they can still be used, and therefore the introduction of CBDC will be a positive factor for the country’s economy.
Petr Brekhov, CEO of SeedLauch, recalled that in 2023 the Central Bank plans to start testing the digital ruble, and if everything goes well, then the CBDC can be put into circulation on a par with the fiat ruble. In this regard, the expert highlighted the following advantages:
- Transparency of all transactions and reduction of corruption;
- Reduction of state costs for the issue and maintenance of paper rubles;
- Acceleration of transfers between users;
- Refusal to pay for transfers. The cost of a transaction within the blockchain does not exceed $0.1;
Not everything is so unambiguous
Despite the obvious advantages of CBDC, some experts believe that the positive aspects will appear only with the right state policy. Otherwise, society will face even more stringent regulation and control.
Vyacheslav Konovalenko, founder and CEO of Syndicate Of Trader, shared his opinion with the readers of our magazine:
“On the question “do we need it” you can meet a huge number of opinions. I am inclined to believe that unequivocally, our country needs to develop more actively in the field of blockchain technologies. But, I am a supporter of the fact that healthy development is possible only by creating a favorable climate for companies and specialists in this field, and not through total control and prohibitions. In my opinion, CBDC will not be in wide demand in the crypto community, and its population will most likely occur through state-owned companies and their employees. Since I don’t see any reason to exchange my stablecoins for a cryptoruble.”
Dmitry Noskov, an expert at the StormGain crypto exchange, believes that the idea with CBDC is good in itself, but much will depend on how it will look in practice – how many real bugs and technical vulnerabilities there will be. It is possible that in the end, already launched projects will have more disadvantages than advantages – first of all, from the point of view of the technical component.
Independent financial expert Alexander Ryabinin, in turn, noted that the state definitely needs the introduction of CBDC. As for ordinary citizens – a big question:
“Those who live a simple life: they work, get a salary and that’s all, there is nothing to be afraid of. For them, nothing much will change, except that the control will be more stringent. Mental pressure. But those who are engaged in entrepreneurial activities, will tighten the screws to the fullest. Now, even novice entrepreneurs who want to collect start-up capital on trial and error will have to report to the tax office for every penny.
You know, when you’re young, you try an idea and sell, trying to accumulate start-up capital to open your company. Now it will be different, because all the revolutions will be visible. Undoubtedly, this will be a plus in the fight against drug trafficking, laundering, bribes and so on. But if you compare whose losses will be greater, then of course ordinary people who want to earn a little more than the black market. They will find loopholes and circumvention of the system in a short time. But people live with it because there aren’t that many resources and experience.”
Cons of introducing digital currencies of central banks
As you know, everything has a downside, and therefore, despite the obvious advantages of CBDC, their implementation is associated with a number of negative aspects.
Georgy Galoyan highlighted the following disadvantages of digital currencies of central banks:
- Government agencies will be aware of all transfers of people, whether they like it or not;
- Despite the fact that the blockchain is quite seriously protected, it does not give a 100% guarantee against hacking and theft of funds;
- Using a CBDC makes sense in a country where internet coverage is over 99%. Without an Internet connection, it is impossible to make a transaction;
- Users should have basic cryptocurrency skills: the ability to open a digital wallet and go through the KYC procedure, manage assets and make transactions, and for an older generation, these skills can seem quite complicated. For example, the project with the introduction of CBDC in Venezuela failed, because most residents of the country simply could not install a wallet on their phone.
The expert also added:
“So far, I do not see any real prerequisites for the issue of a digital ruble. In addition, the Central Bank has also repeatedly spoken out against such an initiative. Therefore, I do not think that in the near future a digital ruble will be issued in the country.”
Petr Brekhov also highlighted a number of negative points:
- Security. At the moment, most protocols and blockchains still remain vulnerable to hackers;
- Full control of the state over finances. The wallet in which digital rubles will be stored will also be under the control of the authorities;
- Complete rejection of anonymity. Personal data will be available to the government.
Alexander Lozben, head of ViaBTC in Russia and the CIS, in turn, stressed that CBDC is a logical continuation of the development of money. In the beginning there were paper bills, then there were non-cash transfers and finally – CBDC, which look like the most organic and competent tool in the hands of the regulator. Thanks to CBDC, the border between the Central Bank, the issuer and the user himself disappears, the Central Banks will have direct access to the personal accounts of users and money. In fact, they will be able to control whatever they want.
If in the non-cash sector this is possible with great restrictions, then with cash it is impossible at all. With the development of CBDC, central banks have the opportunity to directly influence many processes, so the tool for banks is colossally convenient and functional. But here a philosophical question arises – with the development of information technology, society is moving into a digital prison or into digital well-being? To whose advantage will CBDCs be used? The expert is not sure that everything will be carried out in the interests of the people, and not a certain group of people in power. Yes, there are advantages in the form of transparency of many processes and the possibility of effective fight against corruption, but also CBDC can become an instrument of pressure and manipulation.
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