As an investor in today’s market, as you watch Bitcoin, Ethereum, and other cryptocurrency prices, it is essential to do your research and work with experienced crypto brokers. Popular cryptocurrencies like the ones just mentioned are decentralised, peer-to-peer currencies, meaning no central authority controls them.
CDBC’s and stablecoins offer stable ways to invest, trade, make payments, and more. With increased investment and exploration in the digital and cryptocurrency world, we see more options, such as CBDC’s and stablecoins, which offer less volatile ways of engaging on the crypto and digital currency platforms.
The future of money is changing right before our eyes.
Understanding Central Bank Digital Currencies (CBDC’s)
CBDC’s, or Central Bank Digital Currencies, are a government-created version of digital currency, which can be regulated and monitored. The government’s central bank issues CDBC’s, and therefore, takes on the liability for this money and is the central bank’s response to the fast-growing cryptocurrency exchanges.
Some crypto pundits, however, consider them state-mandated spyware and are concerned about the privacy implications of investing in such currencies. CBDC’S are not cryptocurrencies and do not offer the same benefits as decentralised currencies such as Bitcoin or Ethereum.
The benefit of CBDC’s is that the central banking system backs them, so this comes with the knowledge that they are theoretically more stable and secured. Recently the US Federal Reserve announced the Digital Dollar Project and will launch five U.S. digital currency pilot programs over the next year. Meanwhile, in Australia, the Reserve Bank has recently stated that there is no current policy case that warrants the issue of a local CBDC.
Stablecoins are privately issued types of cryptocurrency and are one of the quickest growing sectors of the crypto economy. Typical cryptocurrencies, like Bitcoin, tend to fluctuate, while stablecoins are backed by a reserve asset such as the dollar, cryptocurrency-backed, or a commodity-backed alternative.
Stablecoins are issued by non-profit and commercial businesses and are generally distributed through crypto exchanges. Users trust that these issuers have adequate reserves to maintain the peg, such as the dollar or gold. With central banks, trust is a non-issue. Stablecoins mimic fiat currency — however, they differ from CBDC’s in some crucial ways.
Stablecoins are cryptocurrencies — however, they are not decentralised like other cryptocurrencies, because they require a specific entity to hold reserve assets. The majority of them are blockchain-based and accepted worldwide on many crypto exchanges, which means they offer similar benefits of decentralisation.
Advocates of crypto favour stablecoins because they offer the core functionality that is the same as CBDC’s. They allow the user’s anonymity, security, privacy, and easy access to the global market using cryptocurrency.
How are CBDC’s and Stablecoins Used?
Receiving a CBDC is like being handed cash. The money is in your account and belongs to you. A CBDC is a digital fiat currency. It is traceable and will work the same as other forms of regulated money, bonds, and notes. CDBC’s are touted as being able to bring convenience and security to the digital currency platform.
So far, the only country to launch a CBDC is the Bahamas, although there are pilot programs in the works to determine the use and functionality of digital currency in several countries, with testing programs underway in China, Sweden, the Philippines, Turkey, Japan, Switzerland, the U.K, and the U.S.
With the U.S. entering into a trial phase and creating a digital dollar, we are entering into a time of serious competition between CBDC’s and other cryptocurrencies, especially stablecoins.
Stablecoins are great for easy, fast payments or money transfers, cryptocurrency exchanges or deposits, and withdrawals between fiat currencies. Because of their increased stability as a currency, they provide a simple way for businesses to send money to their employees as well.
Crypto users can also use stablecoins to invest their money while waiting for the market to stabilise as they are highly liquid and tradeable.
How Can CBDC’s Improve The Way The Dollar Works?
With many countries beginning to explore the use of CBDC’s, it will significantly impact stablecoins and the crypto world as a whole.
Proponents believe that CBDC’s will make payments more efficient and make government aid easier to distribute, improving social and economic good for all. In emergencies, assistance would be able to be distributed immediately instead of taking days or weeks for funds to clear.
What CBDC’s and stablecoins have in store for the future, we have yet to see, however their introduction and future adoption open new doors for the possibilities of digital currency.
Aus Merchant Helps You Navigate The World Of Digital Currency
Any investment is a risk, but investing in digital – and cryptocurrencies is an opportunity you shouldn’t let pass you by. At Aus Merchant, we can help you take your first steps into cryptocurrency buying, trading and selling. We are regulated by the AUSTRAC, and our team can help prevent the use of cryptocurrency in illegal activities. We can protect you and your investment every step of the way.
Contact us here today. We aim to get back to every potential customer within one business day. Let us help you get started on your cryptocurrency journey and see your investments thrive.