Glitches in digital currency raises concerns Globally
By MYBRANDBOOK
The ambiguities surrounding the digital currency still leave enough space for the analysis of its unreserved acceptance, trust and anticipation, which are the main drivers for the spread of the network. It is time for the Banks to carefully consider the technology underlying these cryptocurrencies as a potential generic new way of transferring ownership of the value over the long term. Especially Bitcoin is the technology adoption in the presence of network externalities. The growth in digital currencies could make cross-border payments more efficient and help address the $1.7 trillion global trade financing gap.
These burgeoning currencies may not solve all trade issues, however, and could further complicate the supply and demand of foreign exchange, especially for countries with limited existing international trade. There is no doubt that the digital currencies are growing: the market is valued at more than $2 trillion and involves more than 15,000 varieties. Based on the Atlantic Council’s CBDC tracker, nine countries or currency unions have launched their digital currencies, while 15 are in the pilot phase. Additionally, 16, including India, are in the development stage, and 40 are in the research stage. Seven are inactive and two have cancelled any plans to launch it.
Digital currencies could provide alternative credit information for trade finance and there’s a $1.7 trillion global trade financing gap, which heavily impacts SMEs who typically don’t have established financial records with banks. Public ledgers of digital currencies could be used to share payment and financial history to underwrite loans for import and export. At the same time, strong privacy protocols would need to be enforced in order to achieve this.
The Reserve Bank of India will launch the CBDC from the upcoming financial year. This follows the government’s plans to launch the CBDC that will be backed by blockchain technology. The volatility and the speculative nature of private cryptocurrencies like Bitcoin, Ether, etc is what is pushing many central banks across the world to adopt their own digital currencies. Hence, the central bank wants to use CBDCs to provide users with convenience and security of digital as well as the regulated, reserve-backed circulation of the traditional banking system.
Whereas, there were glitches found in the digital currency that is being used by seven Caribbean nations that have kept it offline for more than a month. As we head towards a new age where money and trade in goods and services are more and more digitized, it is crucial to ensure no one is left behind. Finally, despite their promising potential, digital currencies may not, however, solve some existing problems facing international trade and could raise new issues, where security is going to be a major concern.
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