Why issue a CBDC? Here are some points to understand....
Categories: Crypto News
If a country issues a CBDC, its government will consider it to be legal tender, just like fiat currencies; both CBDC and physical cash would be legally acknowledged as a form of payment and act as a claim on the central bank or government.A central bank digital currency increases the safety and efficiency of both wholesale and retail payment systems. On the wholesale side, a central bank digital currency facilitates quick settlement of retail payments. It could improve the efficiency of making payments at the point of sale or between two parties (p2p). No physical coins or notes are available to individuals in a digital society, and all money is exchanged in a digital format. If a country intends to become a cashless society, a digital currency with government / central bank backing is a credible alternative. The pressure for governments to adopt a CBDC is strong, as the market for private e-money is on the rise. If it becomes mainstream, beneficiaries are at a disadvantage because e-money providers aim to maximize their profits instead of the general public's. Issuing a CBDC would give governments an edge over the competition from private e-money.In addition to domestic transactions, the current cross-jurisdiction payments' model depends heavily on central banks operating the real-time gross settlement (RTGS) infrastructure within which all local banks' obligations must settle. Since time lags exist in cross-border payments, participating parties are exposed to settlement and credit risk. A CBDC is available around the clock, while privacy is taken into account to eliminate counterparty credit risk.