In the first two parts of this series on Central Bank Digital Currencies (CBDC), I have focused on why central banks are looking into launching digital currencies and the trade-offs that have to be made to launch one. In this third part, I will look at the risks involved with a CBDC, focussing mostly on the risks for users.
It is true. It will be a security risk we will have to live with. Going forward, seems like the mainstream adoption of CBDC will be a reality. Hence, which are the risks that a country will face if it do not embrace CBDC?
The case for a CDBC based on a blockchain doesn't make much sense. If you want a digital currency controlled by a central bank, you can make it using conventional tech. You don't need blockchains. Blockchains technology is needed to run a decentralized no trust network. The bitcoin blockchain is a slow, resource intensive, distributed database. If you want a centralized database, there is no need for it.
Based on everything I've read, it sounds like a CDBC would basically be a government controlled savings account. It'd probably be built with conventional technology, with standard ways to recover your account if you lose access.
Thanks you for writing this. Content Length ratio is perfect.
It is true. It will be a security risk we will have to live with. Going forward, seems like the mainstream adoption of CBDC will be a reality. Hence, which are the risks that a country will face if it do not embrace CBDC?
The case for a CDBC based on a blockchain doesn't make much sense. If you want a digital currency controlled by a central bank, you can make it using conventional tech. You don't need blockchains. Blockchains technology is needed to run a decentralized no trust network. The bitcoin blockchain is a slow, resource intensive, distributed database. If you want a centralized database, there is no need for it.
Based on everything I've read, it sounds like a CDBC would basically be a government controlled savings account. It'd probably be built with conventional technology, with standard ways to recover your account if you lose access.
Great article Joachim, super!