Current CBDC models not a viable cash equivalent for daily transactions
According to Fadi Aboualfa, head of research at crypto brokerage Copper, the current models of central bank digital currencies (CBDCs) are not suitable as a replacement for cash in daily transactions. Aboualfa questions the feasibility of these models, stating that they have several flaws and that issuing a CBDC would be a massive undertaking for central banks. He also highlights the complexity of establishing trading pairs and maintaining a peg between CBDC brands issued by commercial banks. Aboualfa argues that CBDC interoperability has not been adequately considered, with different central banks having different considerations and requirements.
Key points:
– CBDC models are not a viable replacement for cash in daily transactions.
– Central banks lack the talent and infrastructure to run a fully automated decentralized equivalent to cash.
– CBDCs issued by commercial banks could lead to consumer confidence issues and chaos in decentralized open markets.
– Establishing trading pairs and maintaining a peg between CBDC brands is complex and challenging.
– CBDC interoperability has not been adequately considered, with different central banks having different considerations and requirements.
Hot Take:
The current models of CBDCs are not ready to be used as a cash equivalent in daily transactions. Central banks face significant challenges in designing and implementing CBDCs, including talent shortage and infrastructure limitations. Additionally, CBDCs issued by commercial banks could create consumer confidence issues and potential chaos in decentralized markets. The complexity of establishing trading pairs and maintaining a peg between CBDC brands further complicates the implementation of CBDCs. Moreover, the lack of adequate consideration for CBDC interoperability poses additional hurdles. Overall, there is a long way to go before CBDCs can effectively replace cash in daily transactions.
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