Especially after the emergence of Facebook's Libra project, so to speak, the central banks have been at their feet. Because they began to worry about both regulatory deficiencies and the threat to financial stability. China was the first country to take the first step and remain relatively calm compared to other countries. Immediately following the announcement of Libra whitepaper, the Central Bank of China announced that they were conducting studies on a central bank digital currency (CBDC).
Firstly, as the majority of the cryptocurrency ecosystem agree, central bank digital currencies i.e. CBDCs are not a cryptocurrency like Bitcoin. Because first of all Bitcoin and then other cryptocurrencies, the real goal is to get banks, brokerages and governments out of the way in financial transactions. Therefore, since it would not be possible for a central bank to have no bank or government in between in a digital currency, we can easily see that CBDCs are not really cryptocurrencies in the first step.
But one of the aims of cryptocurrencies is to reduce transaction time and fees on financial transfers... in fact, central banks are aiming for exactly that with CBDCs. CBDCs, which will be used for cross-border and intra-government payments and introduced in digital currency logic, have the potential to severely reduce transaction fees and transaction times currently received. In this case, although they are not cryptocurrencies, I can say that they have various similarities.
Besides these, the central bank's digital currencies say on Wikipedia, “CBDCs are the digital form of traditional currency. CBDCs are different from cryptocurrencies, which are not released by any government and whose legal status is unclear."defined by their testimony. So Wikipedia reveals that cryptocurrencies and CBDCs are different entities from each other.
On the other hand, the introduction of CBDCs is a positive situation. Because CBDCs will potentially have absolutely huge benefits. Already the traditional financial system is now crunching and unable to meet the needs of the time. So CBDC or any different system now had to be developed. The fact that this is a cryptocurrency-like system can play an important role in increasing adoption.
I have just stated that China has taken the first and clearest step on the Central Bank's Digital Currency. China had indicated in its statements that it would not need any banks for the digital currency it was preparing to launch. According to Mu Changchun, a member of the people's Bank of China (PBoC),people will be able to match their identities with the digital coins they keep in their wallets thanks to the soon-to-be-launched state-backed cryptocurrency.
Meanwhile, China's digital currency will be two-tiered. In the first tier, the people's Bank of China will be able to both export and acquire CBDC using commercial banks. In the second tier, commercial banks will be responsible for redistributing CBDC to consumers in the retail market. In addition to all this, China said in its recent statements that the project is progressing flawlessly.
In addition to China, many countries such as Turkey, Tunisia, Senegal, Sweden, Venezuela, Singapore, Uruguay, Cambodia, Marshall Islands, Thailand, Bahamas, Sint Maarten, Curaçao, Iran, United Arab Emirates, Saudi Arabia, the European Central Bank and the Caribbean are working on CBDC.
As far as we can see, CBDCs will be an asset in the financial system of the future. However, they may also have the potential to work together with cryptocurrencies with both their similarities and differences.