New Normal, Digital Transformation, Industry 4.0
Trust | Transparency | Traceability
CBDC and Blockchain Technology
08th December 2021
The central bank digital currency (CBDC) is a form of virtual money issued and backed by a central bank. CBDC’s primary focus is to maintain financial and monetary stability, as trusted as fiat currency. The emergence of CryptoCurrency breaks the concept of existing currency. Against this backdrop, there is a move to issue Central Bank Digital Currency, which would be a direct liability on the central bank and is available to all households and businesses, giving them access to electronic central bank money. Features to be added: More robust, efficient, trusted, regulated and legal tender-based payments option.
Added Interest from the Public The Crypto asset interest has affected Indian investors and the public. Reports suggest that an estimated 20 million Indians have invested in these, with a collective estimated value of about Rs 40,000 crore. The showcasing of events has also increased, as it can be observed that during the recent T20 Cricket World Cup (at UAE), the total spending on television ads from crypto exchanges was about Rs 50 crore.
Critical Factors for Sustainability is Trust (to build up amongst users) and Blockchain technology (as the core platform).
For the cryptocurrency to gain control over the market, it has to command the Trust of its users, which will be based on its economic viability. As the global economy will only grow and become more significant, trade and distribution in the goods, services, and assets produced and consumed also become more extensive. After many deliberations, the currencies’ scope and usage could be changed or controlled further for stability. With the rapid digitalisation of the economy, the need for digital currency has become more urgent and comprehensive. As a former secretary at the Dept of Economic Affairs, Ministry of Finance, says, “The future of currency is in Digital Currencies”.
The encrypted form of digital currency is CryptoCurrency. The authentication of the trade and ownership of cryptocurrencies is based on the distributed electronic immutable ledgers stored and replicated worldwide, also known as decentralised blockchain technology. The authentication does not depend on any central authority or any government; instead, it is based on cryptography and algorithms’ sophisticated mathematics. Henceforth, the crypto/digital currency could easily be categorised into digital assets. The blockchain-cryptography technology platforms create value by producing products, services, and assets transacted in the internal CryptoCurrency.
Immediate Requirement is for the usage of Digital Currency; the following features could be enabled for better control.
- To keep track of Digital Trail
- To classify as an Asset class
- To gather states’ Tax Revenues
Caveat for Implementation: The presence of noise and interest from the active crypto markets in commercials and information dissemination from prominent startups and corporates creates an environment of curiosity and anticipation from a larger audience or users. This (amongst all the backdrop) is a challenge for the authorities to maintain a stable sovereign currency with controlled inflation and a high level of Trust.
In the Field of Finance and Economics, Blockchain Technology has increased its horizon. It includes – starting with Digital Currency, Microfinance, P2P, Lending, Remittance, Global Payments, E-commerce, Smart Contracts, Escrow, Wagers, Securities, Derivatives, Crowdfunding, Debt handling, Private Markets and Equity Markets. Blockchain is not confined to just one particular use-case; subsequently, it makes it an excellent technology for the future of our society. It can be used in almost every sector, including trade finance, bank, Government, education, healthcare, oil, etc.
Requirement for Digital Currency Transaction To be ready for whatever rules, laws, or policies are proposed, exchanges/transactions should always ensure Identity verification processes and transactions are thorough, secure, compatible with compliance, and as quick and seamless for consumers much as possible.
At the onset, cryptocurrency changed the fundamentals of economics, as none can imagine a country running without the role or involvement of central banks. Henceforth, Government across many countries, including India, is trying to bring it under regulations and law. According to reports, countries worldwide have also taken varied approaches to the emergence of cryptocurrencies, the total value of which exceeded $3 trillion last month(Nov2021) As it is still in the early stage of development, the progress in future is yet to be observed regarding the classification of assets, legality of transactions, and development/integration of core emerging technology like blockchain
Prateek Bebortha, Business Analyst TRST01, firstname.lastname@example.org
Share Blog on: