CBDC’s raise more questions and is DeFi the answer!
Here is our pick of the 3 most important Stablecoin news stories during the week.
A board member of the Czech National Bank (Central Bank) has provided a less than glowing opinion on the current viability of Central Bank Digital Currencies (CBDCs). Those questions included whether digital currency would be anonymous or not, whether anti-money laundering (AML) standards would be applied to the anonymous variant, and if the currencies would be interest-bearing.
Interestingly, these are just the sort of questions Ethereum’s DeFi sets out to answer, that is to provide the infrastructure including protocols that keep the pseudo anonymity of Crypto but also enable interest bearing, lending and other common financial products to be made available.
In the meantime the French Central Bank (Banque de France) has announced that SEBA Bank (a Swiss Regulated Crypto and Fiat Bank) has been chosen to test its CBDC for Interbank Settlements. SEBA is plugged into the existing Fiat wholesale FX network and so understands the current system’s strengths and weaknesses that any new CBDC will have to outperform.
Cryptocurrencies matter in the upcoming conflict between digital currencies because they offer a third option and hedge in different situations where state powers may seek to repress their own people and enter into conflict with one another. Cryptocurrencies empower individuals to maintain their financial history and express their financial flow in the manner of privacy they see fit — a freedom central bank based digital currencies are unlikely to offer.
So in summary, CBDC’s have to answer some fundamental questions around anonymity and interest bearing. In the meantime the Crypto world and Ethereum in particular with DeFi are working hard to provide answers. The early signs look promising as people are starting to catch on, as the current total value locked in decentralized finance (DeFi) has now surpassed the $3 billion mark on July 21, according to information from aggregator DeFi Pulse. The total value, at $3.37 billion, has quintupled since the start of 2020.
Alan Scott is an expert in the FX market and has been working in the domain of stablecoins for many years.
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