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Amid crypto winter, central banks rethink in-house digital currencies

Amid crypto winter, central banks rethink in-house digital currencies

Over the last couple of years, numerous reports have surfaced regarding governments worldwide exploring the issuance of their very own central bank digital currency. In fact, to date, nine countries have rolled out an active CBDC offering. In this regard, China’s digital yuan witnessed widespread use during the 2022 Winter Olympics. 

Other countries that have initiated similar projects include the Bahamas, the Marshall Islands and Nigeria. However, it is being reported that Nigeria’s eNaira has witnessed poor uptake so far, and the others have fared somewhat similarly. Moreover, India too has launched a pilot scheme for its digital rupee, while Mexico’s central bank recently confirmed the release of a digital peso within the coming year.

Despite the apparent enthusiasm, a growing chorus of voices in mainstream finance and among the world’s central banks have begun doubting the long-term efficacy and viability of CBDCs. For example, Tony Yates, former senior adviser to the Bank of England, recently exclaimed that the “huge undertaking” associated with digital currencies is not worth the costs and risks. He added that the recent rollouts of CBDCs have been quite suspect, especially considering that most countries globally already have digital versions of their existing cash streams, coins and notes. Yates said:

“Cryptocurrencies are such bad candidates for money. They don’t have money supplies managed by humans to generate steady paths for inflation and are hugely expensive and time consuming to use in transactions.”

Similarly, the East African nation of Tanzania announced in 2021 that it would roll out a CBDC, an action that has remained highly anticipated. However, it recently issued a statement noting that while it was still considering the introduction of a state-backed digital asset at some point, it would be taking a “phased, cautious and risk-based approach,” as it had encountered several challenges that could impact its implementation plans.

Skepticism toward CBDCs isn’t anything new

Kene Ezeji-Okoye, co-founder of Millicent Labs — a British government-backed distributed ledger firm helping the Bank of England with its CBDC trials — told Cointelegraph that skepticism toward CBDCs has been quite prevalent over the last couple of years, citing United States Federal Reserve Chair Jerome Powell’s 2020 speech where he said, “It’s more important for the United States to get it right than it is to be first.” That phrase…

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