The Magazine for Asian Investors
If CBDC and stablecoins rise, is this the beginning of the cash collapse?
The COVID 19 pandemic has far-reaching implications for the world specifically for the economy and business operations.
The main focus seems to be on the slow disappearance of cash. More and more people are starting to use digital currencies in a world that is distancing itself from each other.
Economist Eswar Prasad commented that in addition to the growth of contactless payment systems, another trend is the adoption of alternatives such as cryptocurrencies, which tend to be long-lasting.
For many consumers and businesses, switching to cryptocurrencies is likely a trend that will not return to the old payment method even as concerns about the COVID-19 virus have subsided.
Among cryptocurrencies, there are already some stablecoins that replicate fiat currencies. If governments or central banks want to circulate their CBDCs, the key will be widespread distribution.
Cryptocurrencies have the great advantage that they are decentralized, which means they do not belong to any central institution that could exploit the power of monopoly. In addition, the transaction costs are very low in many ecosystems. With this argument, the central banks want to get their CBDCs in circulation but the devil is in the details. CBDCs are centrally structured which is a big difference from real cryptocurrencies. This means they can be manipulated and controlled like fiat paper. It also makes it easier for governments and central banks to track and block everyone’s transactions. Furthermore, this offers the possibility to block money accounts of apparently suspicious persons and of course to withhold taxes if necessary.
If cash disappears and is replaced by CBDCs, the last freedom people enjoy could disappear.