Central bank digital currencies — digital currencies backed by a central bank — have received renewed interest with the United States President Joe Biden’s Executive Order on Ensuring Responsible Development of Digital Assets. Proponents of CBDCs argue that widespread adoption will promote financial inclusion, expand public access to safe money, improve the efficiency of payments and more.

But their rationale remains tenuous. Many analysts and practitioners increasingly view CBDCs as fundamentally at odds with the purpose of cryptocurrency, which is to provide a secure, decentralized peer-to-peer mechanism for transferring funds. And the hypothetical benefits of CBDCs remain hypothetical — no evidence exists yet that suggests any advantages over other examples of distributed ledger technologies in financial services, especially given the new risks they pose.

The status of CBDCs worldwide

Nine countries have already developed their own CBDCs, and the U.S. has joined a list of over 100 countries exploring issuing one. Most CBDCs take a hybrid approach whereby “The central bank issues the CBDC to banks and other and other payment service providers, which in turn distribute the CBDC to users throughout the economy and provide them with account-related services,” according to a recent report by the Hoover Institution.

There are other types, according to leading experts at the Bank for International Settlements — which consists of stakeholders from major central banks. These include a synthetic CBDC, where the consumer has a claim on an intermediary, with the…


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