The growing interest in CBDC can increase the Bitcoin adoption worldwide, the one of the largest asset management firms, Grayscale, claimed in its recent report.
In report, the firm presented a bullish case scenario for the world top leading digital asset if CBDC can replace the traditional financial infrastructure. Grayscale believes that rising interest in central bank digital currencies can propel the Bitcoin both in terms of price value and adoption. The firm report stated, ”With public trust in governments waning, this paradigm may prove to be a tailwind for Bitcoin.”
The world largest asset manager also discussed the China’s plan to launch the state-issued cryptocurrency this year and the onset of COVID-19 has caused the central banks to explore and implement the disruptive potential of digital currency laid on blockchain.
Comparison Between Bitcoin and CBDC
They have also compared the Bitcoin with CBDC on various factors such as monetary policy, geography, storage, transfer, and hours of operation. The main person of the comparison is to check whether a government’s cryptocurrency will get success in its purpose or not. If CBDCs prove their potential as perfect payment medium, they will then use in digital asset custody, merchant payment solutions, wallets, and exchange services worldwide.
The government-issued cryptocurrency is different from decentralized digital currency because its supply and issuance are under the government control. The report stated:
“If a central bank successfully digitizes its currency, it would still have the ability to dictate and implement monetary policy. In fact, with logic encoded into a CBDC, it would be easier for a central bank to issue new currency and even set effective rates on assets held in personal custody.”
Challenges to Central Banks
The central banks have many challenges to adopt and roll out digital currency for consumers. One of the main challenges is the issuance and storage of currency on blockchain thus removing the need of physical infrastructure. The report added,” CBDCs have the potential to streamline payments, but may compete with commercial banking, further politicize financial services, and fail to gain widespread adoption.”