As a researcher with a background in finance and technology, I find the current debate surrounding Central Bank Digital Currencies (CBDCs) and stablecoins intriguing. The recent surge in CBDC exploration by global central banks, as indicated by the Bank for International Settlements (BIS), is a clear sign of the growing importance of digital currencies in today’s economy.
Opponents among US regulatory bodies have strongly objected to the creation of a Central Bank Digital Currency (CBDC) based on privacy concerns. However, a recent study reveals that a substantial number of central banks worldwide are investigating this innovative technology. Many of these global central banks aim to boost their seigniorage by adopting distributed ledger and blockchain solutions.
Furthermore, the implementation of blockchain technology has been found to be beneficial not only in terms of reduced transaction fees but also for its eco-friendliness. Nonetheless, there are concerns that central bank digital currencies (CBDCs) may serve as tools for government surveillance and potentially restrict users’ transaction abilities.
In response, critics of CBDC argue that allowing the private sector to create stablecoins on various platforms, both publicly and privately operated, is essential for maintaining democratic principles.
BIS Report on CBDC Developments
Based on a study carried out by the Bank for International Settlements (BIS) involving over 50 central banks worldwide, 94% of the 86 institutions questioned are delving into Central Bank Digital Currencies (CBDCs) research and development. The BIS survey was conducted during the period from October 2023 to January 2024.
In their survey conducted in 2021, the bank found that out of the 81 central banks examined, 90% were considering digitalizing their own currencies.
The BIS report highlighted that financial institutions are more inclined towards receiving a wholesale central bank digital currency (CBDC) from their respective central banks, rather than a retail CBDC intended for end-users.
According to the BIS report, over half of the central banks exploring retail Central Bank Digital Currencies (CBDCs) are giving thought to setting holding limits, ensuring interoperability, providing offline access, and implementing zero interest rates.
Market Picture
According to a previous report by Coinspeaker, the Bank for International Settlements (BIS) is investigating the development of a wholesale Central Bank Digital Currency (CBDC), aiming to facilitate smooth foreign exchange transactions among different currencies. This initiative, named project Rialto, sees BIS collaborating closely with various central banks and the Singapore Monetary Authority to ensure an effective CBDC system.
Based on a recent study by the Bank for International Settlements (BIS), stablecoins are seldom employed beyond the cryptocurrency market. Given this limitation, various nations including China, Nigeria, and the Bahamas have initiated the launch of their central bank digital currencies (CBDCs) instead.
The implementation of central bank digital currencies (CBDCs) around the world while private stablecoins are evolving will encounter substantial hurdles due to surveillance concerns. Although many governments have tightened regulations on anonymity-focused cryptocurrencies, the surge in adoption of logarithmic stablecoins spearheaded by DAI is notable.
Based on current crypto market statistics, I find that DAI stablecoins hold a market capitalization of approximately $5.2 billion and an average daily trading volume of around $344 million.
Despite some legal systems limiting the application of logarithmic stablecoins after the Terra Luna UST crash in early 2022 that resulted in over $30 billion in losses, the US SEC and Terra Luna have recently agreed to a settlement worth approximately $4.4 billion following this incident.
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2024-06-14 17:51