CBDC
What are CBDCs? Some people might have heard of this term, which stands for Central Bank Digital Currency. It is a Digital form only of currency that is issued by a country's central bank. There are currently only two forms of cbdcs available. The wholesale CBDC which is usually used by big companies and institutions, and the Retail CBDC which is used by the general public
Now that we know a little more about what CBDCS stands for and what are the two different options, what are the cons and pros of utilizing CBDCs? Let's start with the pros of CBDC, Firstly by implementing CBDC, there would be more financial inclusion which according to the International Monetary Fund would be one of the top 3 reasons why CBDCs should be considered. Not only it would better financial inclusion but it could also make it easier for police to deter illegal Financial Activity. The reason why it would deter illegal financial activity is because online currencies can keep track of all past transactions. This would make it easier for government agents to avoid illegal financial activity, and not only that but also deter criminals.
Another good thing about utilizing CBDCs is that they could offer an easier cross-border transaction. This would facilitate when people have to financial transactions with people in other countries. Although CBDCs have many pros and I have only cited a few of them, there are many consequences that could come along with it. For example, there would be an enormous lack of privacy, because the government would be able to keep track of what you buy on your day to day basis, and as stated before, although this could help with deterring criminals, people would not have privacy.
Another great reason why maybe making cbdcs the standard form of local and cross-border transactions is due to its very high risk of Cyber attack. Hackers would have the ability to steal people's information and money which could affect economy.
Overall CBDCs are a very good option to consider for a standard form of transaction, if the government are able to secure it to a point where cyber attacks would not occur so easily, it could be a good idea to standardize it.
sources:
https://www.forbes.com/advisor/investing/central-bank-digital-currency-cbdc/
https://www.federalreserve.gov/faqs/what-is-a-central-bank-digital-currency.htm
https://boxmining.com/cbdcs-pros-cons-and-everything-you-ever-wanted-to-know/
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