As the world and technology advances, so do everyday items such as money. What were once commodities, salt, copper or gold, later evolved into paper money issued by a bank, and in the future will be bits in a system controlled by a central bank.
CBDCs are digital currencies issued by central banks of countries and are presented as a replacement for cash that, except in some countries, is used on a daily basis throughout the world. They are usually present in crypto conversations since they share the technological environment in which they operate and can even apply blockchain technology in their implementation, but beyond being digital, the reality is that they share very little with crypto technology (and philosophy). .
They will be used as we use current money, to send and receive payments, pay taxes, among other uses. Countries like China, Sweden, have been working on their CBDC since 2017.
The main advantages of this digital currency are related to:
Financial inclusion: Every person with internet and a mobile device will be able to receive and send payments from anyone, wherever they are, without the need for a bank account. This is something that we are already seeing through fintechs and financial apps, but that could not be thought of with cash.
Reduction of illegal activity: Today, cash allows you to make purchases and expenses well outside the radar of what is allowed by the authorities of each country, without anyone knowing what that money is related to. It is estimated that with the use of new technologies, these digital currencies will be able to "solve" this aspect.
Comfort in daily use: The fact that money does not occupy a physical place in our lives, but rather data that we carry on our cell phones, makes it much more comfortable on a day-to-day basis, since we will not have to think about it. situations in which today we do or do need cash.
In addition, we believe that being a gateway to the digitalization of money, it may help arouse the curiosity of some who want to know more about digital money and learn about blockchain technology and cryptocurrencies, with the advantages that these offer.
However, just as it has its advantages, it has its disadvantages, which are not encouraging for the future and we believe that they should not be ignored.
Greater electronic convenience and reduced illegal activity also mean more control. The authorities that issue this digital money are going to have the possibility of tracking all the movements that are made with it, so it is very likely that financial privacy will be lost to a great extent, as long as the states set up an infrastructure and Sufficient budget to comply with that control. Also, since it is programmable money, it is possible to program various functions that harm the end user, such as, for example, that this money can only be used for certain purposes and not others, as well as its expiration, forcing users to to consume with that money, attacking the ability to save and the conservation of its value.
There are already many experts on the subject who have spoken about digital threats that can harm consumers in their autonomy regarding their money.
In addition to the aforementioned disadvantages, there are also disadvantages that money issued by central banks already has, which are related to their ability to issue unlimited money, affecting the value of the currencies held by consumers.
In conclusion, it is most likely that money through CBDCs will be raised all over the world, whether we citizens want it or not. Without actually imagining a dystopian future, with the data presented here we could think that CBDCs bring together the worst of fiat money (uncontrolled issuance and control by the authorities) with the worst of crypto money (traceability: recording of absolutely all the information that flows through there).
Facing this future, it is important to think about how we can continue to protect our privacy on a day-to-day basis, and today the best option is cryptocurrencies and the best one for this purpose is Bitcoin. Another option, a little less convenient for daily use, but which can serve to diversify our wealth based on this privacy that we are looking for, is gold, the use and spending of which is not automatically tracked by a central authority.
The information and analyzes presented in this note do not represent any type of investment recommendation. It is presented for informational and educational purposes only.
