Central Bank Digital Currencies - The Future of Money?

Since the appearance of Bitcoin in 2008 with the Satoshi Nakamoto paper called Electronic Cash System. It emerged a new force into the financial system that governments, private companies and society were not aware of their implications for the future of our economy.

Bitcoin brough to the world an innovation by presenting a digital currency which has functioned in a decentralized network, backed by an algorithm and cryptography, which at the same time allowed transactions between parties without reporting or depending on a centralized party such as private companies, central banks or governments.  

This immediately brought attention to Society, especially on the emerging markets. Nations in places such as Latin America or Africa, where most of the population don’t have access to traditional financial products or are simply unbanked. Bitcoin presented a fast and secure option to transfer money in a cheaper way by using a decentralized network. The remittance market was disrupted by the cryptocurrencies where the traditional services such as PayPal or Western Union were too expensive. Again, a new technology that emerging markets were the first to appreciate.

Governments all over the world paid attention to this phenomenon and started to research more on the technology. By implementing a blockchain layer into their own state digital currencies. Which is known as CBDC or Central Bank Digital Currencies. A study from the Bank for International Settlements showed that out of the 63 largest central banks in the world, 70% were conducting CBDC related work by 2018.   

Which brings to several questions to point out.  If Bitcoin and the Blockchain network has been attractive as they represent a decentralized force into the financial system, a) why implement a digital currency backed by the same fiat currencies or institutions such as a Central Banks (CBDC) or Corporation such as Libra Coin (Facebook) to replace the Cryptocurrency Market which in essence is decentralized?  

That could be answered with the fact that we need the States & Governments in order to create a market for our society. This is described by anthropologist David Graeber in his book called DEBT - the first 5000 years. 

He explains how in the past, anarchist nations lacked a solid foundation to create a market for us as society to co-exist and to function with the traditional trading instruments. In that sense, the creation of CBDCs or Central Bank Digital currencies, which are by notion backed by the government. Could potentially help the transition from a society that exits purely on a centralized economy to a still centralized economy, but with a currency 100% digital, and with a blockchain component.  

If we believe this statement is true. This bring more questions such as b) Will the Blockchain and Cryptocurrencies overtake the traditional Fiat Currencies?  Or c) Will Cryptocurrencies need the support in Governments not only to regulate the market but also to help the transition into a more decentralized economy?

It is ironic to believe that in order for cryptocurrencies to grow as decentralized instruments for our Society, they will need centralized parties in order to gain more users and create a sustainable market. On the other hand, while CBDC might help in the transition into a cashless society. That does not necessarily mean it will replace the cryptocurrencies as we know it or help them by any means. It could be completely the opposite.  

Let's remember that even traditional currencies such as the EURO. Not only it represented a currency per se but also a symbol for society. French Economist Bruno Théret mentioned it in his essay called The Socio-Political Dimensions of the Currency: Implications for the Transition to the Euro. He explains that a currency in order to gain legitimacy in society, must not only be an instrument that can provide the necessary credit for the development of production and trade, allow to pay debts to the public authorities but it must also serve as a symbol of political belonging to a community.  

Will Cryptocurrencies be able to create a symbol for our future global and cashless society? Despite being decentralized? Or will CBDC or digital state coins take that role?

Which brings to several questions to point out.  If Bitcoin and the Blockchain network has been attractive as they represent a decentralized force into the financial system, a) why implement a digital currency backed by the same fiat currencies or institutions such as a Central Banks (CBDC) or Corporation such as Libra Coin (Facebook) to replace the Cryptocurrency Market which in essence is decentralized?  

That could be answered with the fact that we need the States & Governments in order to create a market for our society. This is described by anthropologist David Graeber in his book called DEBT - the first 5000 years. 

He explains how in the past, anarchist nations lacked a solid foundation to create a market for us as society to co-exist and to function with the traditional trading instruments. In that sense, the creation of CBDCs or Central Bank Digital currencies, which are by notion backed by the government. Could potentially help the transition from a society that exits purely on a centralized economy to a still centralized economy, but with a currency 100% digital, and with a blockchain component.  

If we believe this statement is true. This bring more questions such as b) Will the Blockchain and Cryptocurrencies overtake the traditional Fiat Currencies?  Or c) Will Cryptocurrencies need the support in Governments not only to regulate the market but also to help the transition into a more decentralized economy?

It is ironic to believe that in order for cryptocurrencies to grow as decentralized instruments for our Society, they will need centralized parties in order to gain more users and create a sustainable market. On the other hand, while CBDC might help in the transition into a cashless society. That does not necessarily mean it will replace the cryptocurrencies as we know it or help them by any means. It could be completely the opposite.  

Let's remember that even traditional currencies such as the EURO. Not only it represented a currency per se but also a symbol for society. French Economist Bruno Théret mentioned it in his essay called The Socio-Political Dimensions of the Currency: Implications for the Transition to the Euro. He explains that a currency in order to gain legitimacy in society, must not only be an instrument that can provide the necessary credit for the development of production and trade, allow to pay debts to the public authorities but it must also serve as a symbol of political belonging to a community.  

Will Cryptocurrencies be able to create a symbol for our future global and cashless society? Despite being decentralized? Or will CBDC or digital state coins take that role?