CBDC Impact On Cryptocurrency | How CBDC affect Fiat Currency | What are CBDC and Its Full form.
CBDC is the central bank’s digital currency and is being implemented by almost all countries looking for digitalization. All decentralized cryptocurrencies like Bitcoin, Ethereum, TRON, Cardano, etc are already in the market and performing very well.
But they don’t have any governing unit that can regulate, control, and investigate the price. That’s why most of the government was not recognizing this currency. But the central bank’s digital currency has set a new example by eliminating all the problems of the government.
Almost every country moving towards digital revolution is adopting CBDC. India also launched its CBDC currency e-RUPI last 2nd August. Now it remains to be seen how the CBDC currency affects the already operating digital cryptocurrencies.
But for that, we have to first understand CBDC well only then we can assess that.
What Is CBDC?
CBDC is a digital currency issued by a central bank that works on the basis of blockchain technology. It is a type of electronic currency whose value is equal to fiat currency.
It is a type of voucher currency that cannot be used for any miss. This currency has a private layer on top of blockchain technology. To cross which everyone has to complete their KYC.
This currency can be tracked due to the KYC facility. All KYC documents are saved in the blockchain itself.
CBDC Full Form
The full form of CBDC is central bank digital currency. Central Bank in India is known as the Reserve Bank of India, hence RBI’s CBDC currency is e-RUPI. It is an advanced version of the already existing UPI payment system as Indian CBDC currency will be used in place of Indian Fiat currency.
Who Regulate CBDC
Central bank digital currency is controlled by the government of the country or any private entity. In India, this currency is being regulated and controlled by the Reserve Bank of India.
How CBDC Price Is Decided?
When a private entity launches its CBDC, it can set its pricing within a particular ecosystem. As OneCoin cryptocurrency price is decided by the demand and supply of products on the DealShaker platform.
The digital currency which is launched by a government, its value is kept equal to the physical currency of that country. The main reason for this is the ecosystem running in the country which cannot be disrupted.
Advantages of CBDC Over Cryptocurrency
- There is no fluctuation in their price, so more and more merchants accept it.
- The transaction of payment through this currency is done very securely and without any third party.
- Cross border transactions can be done at very low cost.
- These cryptocurrencies cannot be traded on any exchange, so the scope of their price fluctuation ends, no one can collect this currency in massive quantity.
- KYC verification is required to perform transaction of these digital currencies.
CBDC Impact on Cryptocurrency
Not much information has been made available regarding CBDC in India. If we compare CBDC in other countries like Europe England then it is getting a lot of use there.
CBDC as well as other cryptocurrencies being accepted as payment on e-commerce sites. thereby increasing its utility and converting cryptocurrencies into CBDCs.
CBDC cannot be traded so this currency will not have any significant effect on other trading currencies. ut all ordinary cryptocurrencies will have a lot of difficulty in getting merchant approval which is expected to reduce their price or demand.
If this happens, the cryptocurrency market could be almost completely destroyed.