More than 22 per cent of the world’s adults do not have a bank account or payment service account. There are also some financial or banking services that require high service fees. The average cost of using ATMs in the United States is $4.92. The cost of banking services is very high. If you include account management fees, transfer fees and all other fees charged by the bank, you will find that these fees can and account for a large part of your funds, which is a burden for ordinary people.
We need a more efficient, economic and inclusive financial system to meet the needs of the world. We need cheap and easy global payments, we need to provide banking services to people who don’t have bank accounts, and we don’t need intermediaries to do these things. With the arrival of cryptocurrency and blockchain, we are on the verge of becoming a reality, which has proved that this method is feasible and can solve these problems. This technology has appeared, and it is only a matter of time before it becomes mainstream.
The central bank can and is likely to play an important role in this transition. The central bank may take the lead in adopting and accepting this new form of money, so as to promote the circulation and cognition of digital money.
What is central bank digital currency?
The central bank digital currency is not a paper currency printed by the central bank (you can touch it), but a digital token (you can’t touch it) is issued on the blockchain. The value of a token issued on the blockchain is equal to a physical dollar note. These tokens will be saved on your phone and you can use them as you like. So what are the benefits?
From the production of printing template, trial printing to official printing, paper currency not only has complex processes, but also needs a lot of quality inspection on paper consumption, cutting, color, etc., which requires a lot of materials and manpower. However, with the emergence of CBDC, these problems will no longer exist. Compared with paper cash, CBDC only needs a system to manage and store data. All the labor costs of printing are saved, and the technical costs of DCEP system development are converted, which still saves a large amount of labor costs on the whole.
Have you ever tried to use the current banking system to send money internationally? This is very painful and expensive. There are many ways of international remittance. If it is an international remittance, the swift system will be used;. If you want to remit money to international customers, you must know the bank information of the payee, the swift number of the bank, their account number, their address, the name of their first child, etc. You will have to pay a very high wire transfer fee, and it will take them a day or two to receive it. Then, the payee may pay another “collection telegraphic transfer fee” to the bank to receive the money. The premise is that all parties have bank accounts first, and these banks are part of the same system. Due to the high cost, the swift system is basically useless for any small transfer.
However, if the central bank digital currency is used, all these problems will be solved immediately. The currency issued on the blockchain can be sent to anyone in the world at almost zero cost in a few seconds. There are no opaque third-party companies (banks, payment service companies) in the middle of each transaction to charge high fees or absorb all your consumption behaviors so that they can sell your data. You only need to know the blockchain address (a string of characters) of the recipient, and you can use your finger to slide to remit money. The payee will receive the money in a few seconds, and the transaction is 100% verifiable on the blockchain ledger.
It may sound simple, but it is. In fact, this already exists in the form of a stable currency, such as usdc, which you can try immediately. Seriously, try it. Buy some usdc tokens and send them to your friends.
The biggest difference between stable currency and CBDC is that stable currency is operated by the company, while CBDC is issued and operated by the government.
In addition to payment, people can also get many other benefits from transactions with CBDC, such as access to more financial services, such as loans / credits, interest bearing accounts and investments. Imagine that if you can’t get a bank account today (your mattress is your bank), then suddenly tomorrow you can conduct banking business by yourself, remit money to any place, and save money or invest in Securities for your future by depositing them into an interest bearing account. This kind of decentralized financial service using digital currency is unimaginable in the past.
In addition to the above benefits, the advantages of CBDC include simplified accounting, simplified taxation and filing, easier integration into products and services, and so on. Just as the Internet was invented to obtain information, it is a revolution for the world.
Responsible editor: CT