“The Bank of England’s decision to press ahead with further development of the digital pound serves as a reminder that Central Bank Digital Currencies (CBDCs) are not an idea for the distant future, but a soon-to-be-realized feature of our daily lives.
In our increasingly digital world, CBDCs are an inevitable reality. If all payments are made on-chain and governments can track stable digital currency then it solves a number of issues. Tax avoidance becomes harder, welfare payments become more straightforward, and governments can control what those welfare payments are used for.
Criminal activity involving currency will also be reduced or moved elsewhere. At the same time, we will also have faster payment systems, and more transparent and accessible credit histories to work from. The downside, of course, is that a government may be able to seize your assets, monitor your spending, and potentially more if they have full visibility over your money.
Unless we believe that the financial sector is going to disappear, however, what we will likely see evolve is a healthy on-chain private finance system with all of the current protections around privacy and security that we have now. That will be a positive development for the financial sector, for consumers, and for crypto.
Indeed in a statement made yesterday (February 6) regarding the Digital Pound, UK Finance Minister Jeremy Hunt said that the Digital Pound would likely not replace cash, but work alongside it. Chair of the FCA Andrew Bailey added that its purpose would be for consumers to pay and support British businesses. In this vision, the Digital Pound will become an extension of the pound that can be used on-chain throughout the private sector.
Ultimately, these are positive developments for the crypto industry. While crypto is making great leaps forward, it is still operating somewhat in the shadows. In order for it to grow, it needs to be integrated, at least in some part, into the broader financial sector. Once this happens, all of the innovation happening in the blockchain space can benefit the many billions of people in the world that can access it.
Rather than pose a threat to the development of crypto, by spurring the involvement of the traditional financial sector in on-chain finance, CBDCs may clear the path to crypto adoption and growth.”
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