Rise of Digital Currencies Slowed by Privacy Concerns and Practicality Issues
Summary:
Despite the growing popularity of cryptocurrencies, the implementation of central bank digital currencies (CBDCs) may face significant delays due to concerns about privacy infringement and lack of real-world purpose. While 167 countries are currently investigating national digital currencies, the majority of these projects are in early development stages, with only Jamaica, Zimbabwe, Nigeria, and the Bahamas having fully launched their products. Critics suggest governments should focus on regulating the already burgeoning stablecoin market, rather than launching their own digital currencies.
Despite growing interest in digital currencies, the development of active central bank digital currencies (CBDCs) may face significant delays due to various factors, like concerns regarding privacy invasion. As the popularity of cryptocurrencies surged, global governments have initiated their own versions of digital currencies, known as CBDCs. China embarked on CBDC research as early as 2014, with 42 nations following suit by May 2020. Presently, 167 countries are exploring national digital currencies, and only 4 have successfully launched: Jamaica, Zimbabwe, Nigeria, and the Bahamas. However, seven countries, including the Philippines, Kenya, Denmark, Singapore, Ecuador, Curacao, and Finland, have discontinued their CBDC programs.
CBDCs are encumbered by several issues, chief among them being worries over privacy infringement. Critics argue that central banks could track individual spending habits and might even manipulate spending for political motives. A study in the UK last year revealed extensive public apprehension over potential government misuse of CBDCs. The study found the widespread fear of authorities controlling access to personal funds, enforcing time constraints on money, regulating purchase choices, and denying certain people access to financial services.
The impact of large tech companies, particularly Facebook's Libra stablecoin project in 2019, on the cryptocurrency market triggered multiple governments to regulate cryptocurrency initiatives and investigate their own digital currencies via CBDCs.
However, there is a growing belief that CBDCs lack purpose, particularly in countries where stable, digital payment networks already exist. Scholars and industry experts argue that regulation of the stablecoin market should be the government's focus instead of launching its own unproven digital currency. Many critics contend that it would be far more advantageous to exercise control over a globally adopted, privately owned stablecoin than to hold total control over an unused entity. Finally, privacy risks associated with CBDCs are making many countries rethink their digital currency plans.
Published At
6/5/2024 5:01:00 PM
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