Source

The skyrocketing popularity of cryptocurrencies and the rapid spread of cashless transactions are steadily reducing the use of paper notes around the world. Since Bitcoin or other cryptocurrencies are independent and decentralized, there is no control over them by the country's government, which is a major challenge for the national economy. To address this challenge and bring the benefits of blockchain technology under government control, the official digital currency that central banks around the world are launching or planning to launch is called CBDC or Central Bank Digital Currency. Simply put, it is a 100% digital and legal version of a country's conventional paper currency (such as taka or dollar), which has a direct state guarantee or sovereign support behind it. Although the basic working principle of CBDC seems similar to cryptocurrency, there is a huge difference in their philosophy. While Bitcoin operates on the principle of decentralization or no-ownership, CBDC is completely centrally controlled. It is basically based on the country's central bank's own blockchain or distributed ledger technology (DLT). When a country's central bank launches a CBDC, they release this currency directly to the market through a digital code. The common people can directly hold this digital currency without the intervention of any commercial bank through a special government digital wallet on their smartphone and use it for any purchase or transaction. The biggest advantage of this state digital currency is that it increases the country's economic performance and tracking capacity many times over. The launch of CBDC permanently eliminates the huge cost of printing paper notes, keeping them safe, and transporting them across the country. In addition, it makes crimes like tax evasion, counterfeit note trading, money laundering, and terrorist financing almost impossible, because the movement of each digital currency is directly recorded in the central bank's books. Moreover, it is a unique tool for directly delivering government allowances or financial assistance to the marginalized and unbanked population of the country. Currently, many countries in the world are working on this CBDC. China's digital yuan (e-CNY), the Bahamian sand dollar, or India's digital rupee (e-Rupee) are examples of these, which have already been tested or fully launched. However, behind these great benefits of CBDC, there is also a major civic concern, which is mainly the privacy crisis. Since the government will have strict surveillance of every transaction, the state can control the financial freedom and spending patterns of any citizen if it wants. In addition, there is a technical risk that this digital banking system will become completely unusable in the event of a major cyber attack or power outage. In short, CBDC or Central Bank Digital Currency is an inevitable and modern evolution of the global financial system. It combines the technological dynamism of cryptocurrencies with the protection of state law. Despite some controversies and personal privacy risks, CBDC is going to be the main driving force of the future in moving beyond the era of paper notes and towards a completely cashless, affordable, and secure digital economy. Today's discussion concludes here. I hope you've found it interesting. Please share your thoughts on today's topic. Prayers for everyone. May everyone be well. Amen.