CBDC Vs Cryptocurrency: Central Bank Cryptocurrency and already running cryptocurrency both work on Blockchain technology. The working process of these two is also almost the same. You can use both as payment, transactions without a third party, and many more.
But central bank digital currency is being given more recognition by the government of all countries. The country of India has also made its own central digital currency. And our Prime Minister Shri Narendra Modi has also inaugurated it on 2nd August 2021.
Experts and crypto experts are saying that it will work like bitcoin. And it has all the same features as bitcoin and other cryptocurrencies.
But here the confusion comes from the fact that if it is like bitcoin then how is it different from it? And after all, what is the reason that the government raises questions about the circulation of bitcoin? And on the other hand, the government itself is launching its own digital currency.
We can understand these two things only by the difference between CBDC and cryptocurrency. So let’s understand both things and see their difference too.
What Is CBDC?
CBDC is central bank digital currency. It is an online digital currency based on blockchain technology. It has all features like cryptocurrency but a strong layer between blockchain and users.
So, it behaves like a centralized system. Where government can control, regulate, and monitor the coin movement by blockchain KYC system.
What Is Cryptocurrency?
Cryptocurrency is a cryptography-based currency. Transaction of this cryptocurrency is recorded in multiple blocks at the same time. Due to the decentralized blockchain, it is the most secure transaction platform.
Because cryptocurrency is decentralized, no country has any control over it. This is the reason why cryptocurrency is mostly used for illegal activities like smuggling of weapons, money laundering, etc.
The central bank’s digital currency has been launched to stop this illegal use of cryptocurrency. Now let us see the difference between CBDC and Cryptocurrency:
CBDC Vs Cryptocurrency
|It is regulated by Government authorities like RBI and Central Banks.||These are not regulated by any Government and financial institutions.|
|CBDC has a stable price.||Cryptocurrency price fluctuates with time.|
|CBDC has a blockchain KYC system for controlling illegal use.||Cryptocurrency doesn’t have any KYC system. These can be used for illegal payment.|
|It can be tracked.||It can’t be tracked.|
|They are monitored by Government authorities.||They are not monitored by any means.|
|Can be used without the internet through a voucher.||Can’t be used without the internet.|
|Trusted by thousands of merchants.||Not trusted by merchants.|
|Government is responsible for any illegal or misuse.||Nobody is responsible for illegal use.|
|Each country can allow only 1 CBDC coin.||Crypto doesn’t have such kinds of boundations.|
|These are centralized remittance systems.||These are not used as a remittance system.|