Since the world crisis of 2008, no central bank has been able to find a financial solution to revive economies.
Inflation manages to be kept at bay by QE (Quantative Esasing) but this situation cannot be sustained for much longer. The outrageous increase in NPL Non Performing Loans or impaired loans contribute to throwing all credit institutions into the abyss that are obliged to invoke the use of CDOs.
Last but not least, we can add this Covid-19 pandemic, which with the various setbacks in the various companies, I am speaking mainly of Italy, are inflicting fatal blows on an already weakened economy.
In addition to this not exactly beautiful scenario, central banks are added, which to avoid the irreparable resort to Helicopter Money maneuvers and the uncontrolled printing of money: a vicious circle for the devaluation of money.
Faced with this situation, however, some central banks have approached DLT (Distributed Ledger Technology) and the Blockchain with an interested eye.
Digital currencies and blockchain technology are the real technological achievements of this century and not the sluggish smartphone screen!
These technologies, in a short time, will be of common use by the average man, a bit like what happened for the internet and more in depth for e-mail.
The first digital currency, indeed the digital currency par excellence was Bitcoin, many others have gradually been invented; some that contain innovations, such as Ethereum with smartcontracts, other simple tokens that have met a bad end.
Last but not least, CBDCs: with banks approaching DLTs and the blockchain, the very first idea that came to central banks was to create a digital currency.
What is a CBDC?
A CBDC (Central Bank Digital Currency) is a digital form of the bank's money, which is legal tender and is backed by a central bank.
The aim is to increase effectiveness: as a means of exchange; security: as a store of value and stability of the currency.
There are two types of CBDC:
- Wholesale CBDC: they are used to facilitate payments only between banks and other financial institutions that have accounts with the central bank.
- Retail CBDC: they are used by the final citizen for various payments or by the central bank for loans to individuals and companies.
CBDCs can provide central banks with more effective and future-oriented tools to enable better and more effective monetary policies.
In this way, commercial banks lose their meaning of existing as all bank-citizen relations will be one and only with the Central Bank.
It seems like a small detail, but if all commercial banks disappeared, the risks for savers of losing their money would be reduced to the bone: the central bank could hardly suffer a default: it would mean that the nation's economy has failed!
However, CBDCs do not solve the border problem: no state willingly accepts the currency of a foreign state as a counting unit.
This aspect could be solved very well by the Stellar Lumens ecosystem (XML), in fact the platform provides a worldwide currency transfer service.
As we can see in the diagram below, if I decide to send a certain amount in $ to a person, Stellar stands between me and my creditor by transforming my $ into XML and when they arrive at their destination, that is to my creditor, he can safely withdraw them. in its national currency.
This system is a palliative, in fact if you could use, for example, Bitcoin, there would be no need for all these technological artifices.
Simply from Australia, through my Wallet I could send any amount of Satoshi to the other side of the and my correspondent would find in his wallet Satoshis ready to be spent.
Basically the CBDCs, if analyzed more closely, can bring that breath of innovation preparatory to a mass-adoption of real cryptocurrencies.
Meanwhile, even if centralized, let's not forget that we always talk about a central bank, they take away some “useless” passages such as commercial banks that profit, sometimes indiscriminately, on our savings and / or credit needs.
What do you think of CBDCs?