Central Banks Want to Issue Digital Coins But There’s a Major Trade-Off
CBDCs have the potential to disrupt the world of money as we know it and lots of people are trying to figure out how to preserve the status quo.
What happens to the U.S. dollar’s global influence in the age of crypto?
Photographer: PM Images/Digital VisionFrom the Federal Reserve to Bhutan’s Royal Monetary Authority in the Himalayas, central banks are working on digital currency studies or projects. There are several reasons for this. Most importantly, private cryptocurrencies and so-called stablecoins are rapidly becoming popular rivals to traditional money; Central bank digital currencies (CBDCs) would not only keep governments in the game but could help make payments and monetary policy more efficient and direct.
CBDCs have the potential to destabilize everything from traditional banking to the power of the U.S. dollar — and authorities are wary of too much disruption to global financial stability. There is a tricky trade-off: The more limits and oversight get built into state-backed cryptocoins the less likely they are to be used.