Numerous countries are currently working on introducing central bank digital currencies (CBDCs). China is currently leading in the development of its CBDC, known as the digital yuan. Following China, many other countries have also started exploring and developing their own CBDCs. These countries include Japan, Australia, France, Sweden, and even the United States itself is considering the possibility of implementing a digital dollar.
While on the other hand, Diem is a permissioned payment system and mechanism that utilizes blockchain technology. It is backed by Facebook Inc., a global social media platform and corporation. The Diem Association is working on rolling out its cryptocurrency project. The question, however, arises that is there any possibility that both CBDCs and Facebook’s Diem will exist together going forward and will go hand-in-hand with each other in the future?
Several reasons as to why this may happen
We have already mentioned that CBDC and Facebook-backed Diem tend to go hand in hand, and there are several reasons for this. The ongoing COVID-19 global pandemic has forced a lot of people out of their respective jobs all over the world. This has resulted in these same people having to search for alternative sources of income, and this just happened to coincide with the rise in popularity of fintech, cryptocurrencies, and blockchain.
Also, nowadays, many are generally moving away from the mindset of holding traditional cash and are thus making the jump to the world of digital finance. Naturally, having a smartphone would make this jump a lot more accessible and easier, and as nearly everyone in this day and age has access to a smartphone or related smart device, Facebook realized that there is a potential for Diem.
Moreover, not only do CBDC and Diem share a lot of similarities and common attributes, but Diem has the additional benefit of assisting in the preservation of local independent usage of the currency. Apart from this reason, both will also be utilizing interchangeable payment rails, as both rely on blockchain technology.
CBDC & Diem are the future of finance
Few would deny that the world is moving away from the traditional mindset and into new horizons. Digitized finance is not only already here, but it will continue to grow as time goes on, and so both CBDC and Diem represent the opportunity for individuals to take advantage of this socio-economic shift.
Not only are big-time companies and governments alike looking to become increasingly digitized, but many are finally accepting blockchain and distributed ledger technology as part of their day-to-day activities as well. CBDCs are already underway in many countries, as we have already stated, and Diem looks to be inserting itself into the digital fray as well, prompting many to join in or experience FOMO (Fear Of Missing Out).