Digital currencies are decentralized. They are not regulated by any financial institutions such as Central bank. Cryptocurrencies have been around for a while, and they are becoming prevalent. Since the outbreak of digital currencies in 2016, it has become a force to reckon with in the financial community. It seems as though digital currencies would replace fiat money.
The idea of digital currencies replacing central banks globally was always debunked and thought to be a far cry. Countries, through their monetary policies, stifled the adoption of digital currencies stating reasons such as insecurity and poor regulation not to use digital currencies officially. Over time digital currencies were only used by individuals at their own risk, and it has managed to grow from strength to strength.
CENTRAL BANKS ACCEPT DIGITAL CURRENCIES
Now in more recent times, central banks all over the world have flirted with the possibility of issuing official digital currencies. These currencies, albeit unreleased, were quickly dubbed the Central Bank Digital Currencies, CBDC. The digital currencies are only issued by central banks, which hitherto only supported and backed fiat money. The central banks did not just want to develop and issue cryptocurrencies but had the intention of adopting them as a means of payment and account unit.
The change of heart by central banks all over the world will not come as a surprise to you if you understand that digital currencies threaten the monopoly and control over the issuance of money all over the world. Central banks had total control over fiat money, and they regulated them as they pleased. The king of digital currencies, bitcoin, came into play during the 2008 financial depression, which took most of the big players and banks in the financial institution to the slaughter, and they needed to be saved. The financial crisis exposed how weak and flawed the central bank and fiat money could be.
TAKING BACK CONTROL
Reluctantly, central banks all over the world are beginning to accept the fact that digital currencies have come to stay, and they are the future. They have realized that since it has already begun without them and has thrived that it might as well take over whether or not they choose to be part of it. The Central Bank Digital Currencies is now the way to go and countries around the world have started to test it.
Conclusively, fiat money may not be discarded completely, but it is obvious that they are going to take a backseat in the nearest future for the Central bank-backed digital currencies to come to the forefront.