Recalling the past from gold, silver to commodity money to fiat currency a monetary system is followed. The timeline has degraded from gold standard to a paper backed by government trust and Now the pandemic and corruption in the system gave rise to a new form of a monetary system called central bank digital currency (CBDC)
What is CBDC?
Central Bank Digital Currency is a means of payment, a unit of account, and a store of value it makes transactions transparent like fiat currency but virtually. Banks have been overshadowed by the rising popularity of cryptocurrency. CBDC works on permissioned blockchain meaning it is centralized and controlled by the central bank. The goal of CBDC is to have more control over money by central banks without the need for third-party commercial banks.
China on its way!
China has the lead over other countries in CBDC. Digital yuan is the name given to CBDC in china it will soon replace all the physical cash. In China above 90% of their population use mobile payment recently China rolled out digital yuan in lottery money and tested it. In the future, China is trying to make transactions possible without a network connection. Shortly, the Chinese government wants the digital yuan to be a primary mode of transaction.
Drawbacks
- Unbanked people
- expiration dates could be set on digital currency
- Digital wallet for everyone in the country
- Elderly people with less knowledge of technology
- People gonna hate it when every transaction are been monitored
Conclusion
The technology to create digital wallets and CBDC itself is gonna take years for other developing countries but in the future CBDC will be rolled out due to its high security and higher difficulty for criminal activities and money laundering.
