If you’ve read the first part of our CBDC guide, this second part will undoubtedly interest you. CBDC and future of the economic system, here is the other information to know about it.
The main obstacles to CBDCs
Any new concept has its obstacles to overcome and CBDCs are no exception. The first concerns the resistance of national currencies. The general public is used to the current monetary system. And this even if it is ineffective. Credit card payment systems have been around for a long time, as has the technological framework on which these transactions run. Changing these habits is a real challenge, with many countries accumulating decades of muscle memory using a credit or debit card.
Another obstacle with the notion of privacy. Privacy expectations vary widely from country to country. However, they are essential to the success of a CBDC. The existence of government digital currencies is more accepted in countries where surveillance is common. However, in Europe, the general atmosphere is not the same. European citizens are reluctant to give their governments such visibility into their personal and professional transactions. CBDCs must therefore find the right balance between efficiency and privacy of individuals. Some ideas have already been put forward by central banks, such as the use of blind signatures and zero-knowledge proofs. Still far from the Shamir Shared Secret, but already a step forward.
CBDC, an economic growth accelerator?
It should be noted that there is a close relationship between the efficiency of payment solutions of a nation and the economic growth of the latter. For example, a fairly smooth cross-border payment system reduces friction, costs, delays and risks during integration. These efficiencies open up new markets for local products. Not to mention the various benefits for importers. A country with a CBDC is exactly capable of guaranteeing all these resources. It becomes undeniably more competitive and accessible on the global market.
Compared to traditional systems, there are two important advantages: a Rate it reliability lifted up is one lowest cost. Reliability reduces the need for large capital expenditures. On the other hand, cost reduction promotes economic growth, bringing more innovative products and services to the market.
Will CBDCs increasingly become part of our economic landscape? It’s a safe bet that yes.
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