The week began in a rather chaotic place: last Friday, news that the founders of crypto derivatives exchange, BitMEX had been indicted was nearly eclipsed by news that United States President Donald Trump had been diagnosed with COVID-19.
At the same time, the European Central Bank (ECB) published a statement saying that it was seriously considered the exploration of a digital euro by mid-2021.
The Most Diverse Audience to Date at FMLS 2020 – Where Finance Meets Innovation
The action did not stop there. On Tuesday, United States President Donald Trump, still recovering from the COVID-19 diagnosis, abruptly called off negotiations for a second COVID-related stimulus plan. The move sent United States stock markets into a temporary free-fall that was eventually corralled by an apparent attempt on the President’s part to backtrack the decision.
Trump says he’s stopping stimulus talks until after the election.
U.S. stocks:https://t.co/i4kMd2dEDe pic.twitter.com/GH1C4Oh0AA
— Bloomberg (@business) October 6, 2020
While most analysts agree that CBDCs are an inevitability in Europe and elsewhere in the world, the process of developing and issuing a CBDC seems to raise more questions than answers.
“CBDCs Are a Double-Edged Sword.”
“CBDCs are a double-edged sword; on one hand, they can speed up transaction processing, making them more efficient and less costly to banks and governments,” said Juan Aja Aguinaco, co-founder of Shyft Network, to Finance Magnates.
“However, they also represent considerable security challenges to both central banks and users and may have deep privacy implications that will leave users vulnerable to government-led financial surveillance,” Aguinaco said.
The effect this will have on crypto markets is unclear: while it is possible that the implementation of a CBDC could bring money out of crypto markets, it is also possible that these kinds of surveillance privacy concerns could push even more people to use Bitcoin and other cryptocurrencies.
Additionally, “moving to CBDC is not as easy as it sounds,” said Tal Eyashiv, founder & chief executive of SPiCE VC, to Finance Magnates.
“There are many operational and control issues to be answered before a CBDC can be a reality in a country,” he said. “Will the role central banks be related to the provision of liquidity and intermediation services change? How will it impact the role of banks?”
The effects of CBDC implementation are still unknown: “global CBDCs can potentially significantly change current implementation and ecosystem operations of money and payment-related processes,” Eyashiv told Finance Magnates.
“Also, creating the means for all members of society to eventually use a CBDC rather than paper money may take much thought and implementation.”
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