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Is Digital Money Going to be Synonymous to Bitcoins?


As long as you don’t start equating the future of money with Bitcoin, the notion that most of today’s cash use will move to digital tokens is neither faddish nor outlandish. Governments can borrow some of the technologies for the distributed ledger that have been underpinning private cryptocurrencies, but they want to retain control over their economics’ money circulating. Some are going to work. If you want to know more about bitcoin mining visit here

Don’t be shocked if your smartphone’s e-wallet resembles a multicurrency account by the end of the decade. You can, however, be a customer of central banks rather than commercial banks. In reality, there were quite a few of them.

Bitcoin trading
Photo by Dmitry Demidko on Unsplash

Doesn’t it seem a little far-fetched? Apart from the Bahamian Sand Dollar, there is currently no official online currency in use. Nonetheless, digital yuan pilots are picking up steam, with Beijing hoping to launch the currency in time for the 2022 Winter Olympics. Sweden may be the next big country to do so. The Bank of Japan has no immediate plans, but it does recognize the likelihood of a future “surge in public demand” for official digital currency.

Once China and the United States join the battle, virtual money is destined to become a weapon for wielding global power by dividing the world into new currency blocs. Since every token can have dual uses outside of the issuing nation’s boundaries, this is the case. The dollar or yuan that appears in an Indonesian or Indian phone wallet — backed by the pledge from all taxpayers in the United States or China — may be used to purchase products, services, or properties all over the world.

This new money might just as easily replace domestic currency in people’s everyday lives. According to Tao Zhang, a deputy managing director at the International Monetary Fund, although this is similar to conventional dollarization that occurs in countries plagued by inflation and exchange rate volatility, the convenience and accessibility of central bank-issued digital cash could allow substitution at a faster pace and on a larger scale.

Smaller economies would need their tokens to be appealing in domestic circumstances to maintain the influence of monetary policy. Larger countries may have different goals.

All digital currencies issued by central banks must be interoperable in order for the future to be effective. To put it another way, they’ll communicate with each other as well as private-sector alternatives like Bitcoin.

Guo is addressing the issues that will arise when sovereign money becomes digitized: How can high volumes of transactions be processed easily, cheaply, and with a high level of consensus among registries that are updated automatically across a network? Also, after the anonymity of cash has been lost, how can people have a sense of privacy in their daily payments?

Choices would have to be made by central banks. Not all smartphones are capable of running advanced virtual machines that execute software code for automated contracts with ease. If the wrong technology is chosen, the unbanked population will once again be left out. Similarly, international remittances are a $124 trillion-a-year incentive for tokens to replace an expensive network of correspondent banks transferring money by exchanging SWIFT messages. However, if the computational power required to validate transactions in a decentralized network is prohibitively expensive, it will not work for small transfers.

Coopting the private sector may be one way to alleviate the stress. An official virtual currency, maybe similar to iOS, with commercial banks and online wallet providers running applications on top of it. For a casual user, the Apple Health app can suffice; however, an athlete may need something more sophisticated. Money might go in the same direction.

Many emerging-market central banks may believe that in order to keep control of their countries’ currency, they must force citizens to use a single virtual token — the one they’ve created.

Sovereign currency issuers would have to think of themselves as service providers in a free market of digital cash, rather than lords and masters. After all, they’ll be shoving their goods into already-overflowing pockets, hoping that we’ll prefer them to a competing offering from another central bank. Those who lose the plot risk losing the support of their people.