Some experts and central bankers point to regulation as the way forward. And monitoring stablecoins and crypto exchanges would be a much easier affair than having control over individual financial crypto products.
Some experts and central bankers point to regulation as the way forward. And monitoring stablecoins and crypto exchanges would be a much easier affair than having control over individual financial crypto products.
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Money is just one of the various things that have experienced the Midas touch of technology. Currencies are now going through the experience of digitization. Roughly 105 countries, representing more than 95% of global GDP, are exploring Central Bank Digital Currency (CBDC) for their citizens.
CBDCs are the latest in a series of ongoing innovations in the money market. They are virtual currencies that are backed and issued by the central bank of a country. And they have been developed to increase financial inclusion and counter the growing influence of cryptocurrencies and stablecoins.
Central banks in many countries have realized that they need to provide an alternative to the likes of bitcoin, or let the future of money pass through them. Digital currencies have been launched in 10 countries with a pilot expansion to China in 2023. Nigeria, Africa’s largest economy, launched its CBDC in October 2021. Jamaica is the latest country to launch a CBDC, JAM-DEX.
India’s RBI has drawn up plans to introduce CBDCs in the coming financial year. In its annual report for 2021-22, the central bank proposed a graded approach to introducing CBDCs.
While central bankers are busy transforming the monetary system with digital currency experiments, private players are also entering the market with their own tokens. And some central bank governors are open to the idea of issuing private tokens alongside CBDCs. They see private tokens better than CBDCs.
Australian central bank governor Philip Lowe has said that private digital tokens issued by companies may be superior to those issued by central banks, assuming that companies can be regulated appropriately.
Mr Lowe suggested that stronger regulation could help reduce the risk to the public. His suggestion should be viewed against the backdrop of the collapse of the Tera USD stablecoin two months ago. TerraUSD (UST), now renamed TerraUSD Classic (USTC), lost its peg and drove down the value of the entire Terra ecosystem. This caused a multi-billion dollar domino effect on the worldwide crypto market.
Despite the multi-billion-dollar collapse, many experts do not see the end of cryptocurrencies or stablecoins. They see that the technology and innovation underlying these developments has the potential to be critical to the changing financial system.
Some point to regulation as the way forward. And monitoring stablecoins and crypto exchanges would be a much easier affair than having control over individual financial crypto products.
This approach basically lies with crypto proponents. The latter build their system on blockchain technology to keep middlemen, including central bankers, out of their digital ecosystem. There is a hazy picture of where things are headed in the next few years: towards a regulated future. And during that time, Midas Touch will replace the financial systems with a single layer of technology.
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