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The need to introduce digital dollar Central Bank Digital Currencies to replace fiat money similar to Bitcoin has come out of the Coronavirus Pandemic which has exposed the limitations of the current financial system as Economic Bail out stimulus methods used in the 2008 Economic Crisis based on printing more paper money have not led to an economic revival.

Nevertheless, it is important to realise that there are important differences between digital dollar Central Bank Digital Currencies (CBDCs) issued to replace fiat money and Bitcoin as well as other Cryptocurrencies in general.

The Reason Central Bank Digital Currencies Are Being Issued By Central Banks

Digital dollar Central Bank Digital Currencies issued to replace fiat money have come out of the realisation that the Trillions of Dollars printed during the Coronavirus Pandemic failed to stimulate Economies because the debt based monetary system on which Fiat money is based failed to ensure that the Printed Money issued by Central Banks was distributed efficiently and effectively to the Public in the Economic system.

In particular, the debt based fiat money Central Banking System in which money is created out of debt means that all money created by Central Banks is distrubited to Private Banks and Financial Institutions first before reaching the public.

Whilst these institutions are meant to distribute the money to the public, the reality is that they used the new stimulus money to address the Financial losses they faced as a result of risky Business Investments in Financial Instruments such as Derivatives made before the Coronavirus Pandemic.

Much like the Economic Crisis of 2008, the Central Banks are faced with the question of whether the Private Banks are still too big to fail and if they should continue to be bailed out in order to protect the public from financial ruin.

This time however, the Central Banks may decide to let the Banks fail instead of Bailing them out like they did in 2008 by stopping the money printing to give Bailouts and offering Banking services and secured deposits directly to the Public through a digital dollar Central Bank Digital Currency that does not require the Public to hold a Bank Account with any other Private Bank other than the Central Bank.

Its been suggested that the Central Bank digital dollar Account will be in the form of a Mobile Application which the public simply downloads in order to obtain access to funds previously held in Private Banks but which are now Credited to them by the Central Bank.

The rise of digital dollar Central Bank Digital Currencies to replace Fiat money will therefore see the end of traditional Banks but the question still remains whether Central Bank digital dollar Currencies are the same as Bitcoin and other Cryptocurrencies.

The Difference Between Central Bank Digital Currencies and Bitcoin

Whilst digital dollar Central Bank Digital Currencies issued to replace fiat Money and Bitcoin are both digital, there are major differences between Central Bank digital dollar Currencies and Cryptocurrencies such as Bitcoin.

Bitcoin is more an advancement on the concept and idea of money itself, whilst Central Bank digital dollar Currencies issued to replace fiat money are essentially an improvement to current Digital Payment systems.

In other words, digital dollar Central Bank Digital Currencies issued to replace fiat money only update transaction infrastructure, whilst Bitcoin is an exercise in updating the notion of cash itself.

Central Bank digital dollar Currencies issued to replace fiat money can therefore be understood as digital fiat currencies, and they work in the same way as traditional fiat currencies. 

For this reason, Central Bank Digital Currencies issued to replace fiat money involve greater and tighter Central Government control of monetary policy.

In addition, it enables greater State Surveillance and control of Citizens through a Centralised Government digital dollar Ledger which could also be used to enforce and automate Tax Collection as well as Anti-Money Laundering Laws.

Bitcoin is based on a decentralised Blockchain Ledger which cannot be placed under Central Government Control which means that Governments cannot dictate Monetary Policy in relation to Bitcoin.

Furthermore, unlike the Central Bank Digital Currencies issued to replace fiat money, Bitcoin remains autonomous and cannot be subject to things like automatic Taxation or used as a means for Government surveillance and control.

Bitcoin essentially enables people to transfer and store value without having the threat of debasement, censorship, and seizure.

On the surface it may seem like a digital dollar in the form of Central Bank Digital Currencies issued to replace fiat money is the same as Bitcoin because they are both digital. However, there are fundamental differences between Central Bank Digital Currencies issued to replace fiat money and Bitcoin.

From this perspective, Central Bank Digital Currencies issued to replace fiat money seem only to be an evolution of the current monetary system to the extent that they may lead to the demise of traditional Banks as an Intermediary between the Public and Central Banks.

In the final analysis, the elimination of Private Banks as middlemen in the monetary system will only serve to empower Central Banks even more and provide them with Political and Legal Powers they could only dream of before the introduction of Central Bank Digital Currencies to replace fiat money.

Central Bank Digital Currencient Issued To Replace Fiat Money