Central banks worldwide are pushing forward with digital asset projects despite the various crypto industry implosions over the past 12 months. China has rolled out its central bank digital currency (CBDC) to several cities, and it was available for use at the Winter Olympics.
Many other central banks, including the Bank of England, are considering how to roll out a CDBC, while Nigeria’s CBDC has had poor uptake so far. India has already launched a pilot scheme, while Mexico has confirmed the launch of a digital peso.
However, Tony Yates, Financial Times writer and former senior advisor to the Bank of England, advises against CBDCs. According to Yates, “The huge undertaking of digital currencies is not worth the costs and risks.”
CBDCs are already in place in most countries as most countries already have digital versions of cash, coins and notes. Yates, therefore, questions the motivations behind global rollouts of CBDCs, calling them “suspect.”
CBDCs could be a way of quashing crypto, including decentralized currencies such as Bitcoin (BTC). However, “Cryptocurrencies are such ban candidates for money,” he explains, adding:
“They don’t have money supplies managed by humans to generate steady paths for inflation and are hugely expensive and time consuming to use in transactions.”
Yates’ take on Bitcoin is unsurprising: he has tweeted several times about Bitcoin, claiming that most of Bitcoin’s use is “illicit” and “speculative.”
I would guess that most of the use is 1) illicit, and not discouraged by central bank provision and 2) speculative; if CBDC were to cause a large price drop, this could wipe out and discourage a lot of users.
— Tony Yates (@t0nyyates) April 17, 2021
Since Bitcoin is using a public ledger that’s available for everyone, its use for illicit purposes has decreased steadily over the years to less than 1% of total transactions, reports show.
On top of that, the layer-2 Lightning Network allows instant remittance payments, while other cryptocurrencies and even stablecoins continue to grow in use case and development.
For Yates, introducing CBDCs is akin to “making central bank reserves more widely available than just to counterparties”. But in a world in which the reserve currency in the US dollar, the competition for a new global CBDC is counterproductive.
Related: Tanzania ‘cautious’ on CBDC adoption after initial research
The Financial Times opinion piece summarizes that the most compelling arguments for CBDCs are about payments and settlement efficiency, but the debate is “mysterious.” Yates explains that it would be a colossal undertaking for the central bank to employ the staff to build and manage the hardware and software of a new payment system.
Source: https://cointelegraph.com/news/cbdcs-not-worth-the-costs-and-risks-says-former-boe-advisor
