It looks like a wave of CBDC is coming to the cryptocurrency world soon. China is actively rolling out its digital yuan, France is testing the digital euro and asking the US to start working on a digital dollar that grows day by day. There is much discussion about the short- and long-term effects of CBDCs, particularly on international trade.
Now, a South Korean Central Bank executive has spoken about the effect CBDCs will have on the private cryptocurrency market. Specifically, the effect they will have on bitcoin, which of all cryptocurrencies is the most successful and high-profile.
Is the fate of Bitcoin already sealed?
The comments in question were made by Bank of Korea Governor Lee Ju-yeol and, according to him, the demand for bitcoin will drop significantly once CBDCs take root.
He argues that bitcoin and other similar cryptocurrencies are too volatile and that this makes them unreliable as an adequate store of value. Therefore, he says, once world governments offer citizens more stable versions of cryptocurrencies, current ones will see a decline in interest.
“As central bank-issued digital currency is introduced, the demand for bitcoin and other cryptocurrencies as a means of payment will decrease,” says Lee.
Now even the states seem to want to go down this path
The central bank is in the process of piloting its own CBDC later this year, joining the ranks of other countries that are doing the same thing. The pilot project will test the usefulness of the proposed token for payments, transfers and redemptions. Last month, the central bank released a research paper stating that CBDCs meet the requirements to be considered money as fiat currency.
The paper also concluded that cryptocurrencies do not meet this requirement. However, the tests will be carried out by the Central Bank of South Korea prior to the formal launch of the token.
"Before a CBDC is deployed, there is a need for an inspection of technology requirements and a thorough examination of the impact of a CBDC on the financial system," Lee said.
There has been a worldwide regulatory pushback towards using private cryptocurrencies on a large scale. In fact, China's decision to launch its own CBDC is believed to be in part a response to the growth of private cryptocurrencies around the world and the announcement of the Facebook token for its more than 2 billion users.
If this were to be true, the price of bitcoin could collapse. But for the moment there is no talk of it and therefore it is still possible to trade cryptocurrencies for profit with software such as Bitcoin system. Easy-to-use apps and wise investments can still allow people to achieve greater financial peace of mind.
And if things change in the future, apps will adapt accordingly. And what do you think of it? Will CBDCs supplant private cryptocurrencies? Let us know in the comments below.