The Fed is about to launch the CBDC review as early as this week. It was planned to review in September but it got a move to October. Why it matters anyway?
The Fed’s concerns
The Federal Reverse concerns the inflation did not plan out to be transitionary but permanently stay with the economy. High inflation will make a majority of people change their living standard and goods will become more expensive than used to be. This will spark social unsettlement and impact the stability of society. Or the Fed chair will be replaced. That is the most important thing in the current Fed chair’s mind, to keep his job as long as possible.
CBDC as a solution
CBDC or Central Bank Digital Currency has been portrayed as a solution to encounter cryptocurrency. As the rate of cryptocurrency adoption continues to increase, the companies may choose crypto over banks and eliminate ever slow and complex banking systems and embrace the faster and easy cryptosystems. CBDC supposes to be as compatible as crypto does or even better.
CBDC may not work eventually
The design of cryptocurrency is to eliminate the middleman or third party during the transaction and force transactions to execute when meeting programmable requirements. CBDC is a centralized digital currency design purposely to track transactions and eliminate risks of financial-related crimes and activities. Although its intend may prevent harmful financial activities at first, it may harm society as a whole when the governing body is corrupted.
People have a choice to choose a better way of transacting their money
When CBDC competes with cryptocurrency, people can choose the one they like the most. Cryptocurrency will continue evolving and updating. Similar to CBDC, it needs to continue evolving to compete with cryptocurrency. People will use the most updated and recent version of currency to fit their needs.
Payment services are at the war zone now
Visa was getting ahead to involve in stablecoin and CBDC cross-chain payment system. Now banks are pressuring Visa to increase Apple Pay transaction fees to give advantages to banks. The technology company will also create its own way of payment systems to cut off banks.
Banks are the losers
Payment companies that focus on customer-centric service have won over users and grow ever bigger than banks. Banks are no longer able to compete with payment companies. Cryptocurrency further replaces the need for payment companies and banks that used to directly transact between and other companies can cut off payment services by directly adopting cryptocurrency as Twitter did.
A decentralized system gains momentum
If a decentralized financial system can serve people and sustainable growth, it will impact the entire economy and the social system. We may no longer need a trust system that runs checks from the top down but creates loopholes on the top with no one ever can regulate them but themselves.
In conclusion
Whichever system you are rooting for, they will create away and you have a choice to choose between. I think the Fed sees the future that way. Of course, the Fed chair still wants his job back!
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