Central banks around the world are considering the creation of their own digital currencies, and the warnings are coming in fast and furious from the very people who might be expected to welcome the change: central bankers themselves, including the CEO of leading cryptocurrency exchange Binance, a man who admits to being a former central banker himself, Changpeng Zhao.
Cryptocurrency is a hot topic these days, so it is only natural that we are seeing different countries introducing their own versions of digital currency. The latest country to do so is the United States. The official name of the new currency is Digital USD (DUS), but it is not entirely new. In fact, it is the same currency that was tested in 2016, and it’s the same currency that launched in 2017. The only difference is that this time around, the currency is a lot bigger, and it will soon be available in all 50 states (and Puerto Rico).
Cryptocurrencies like bitcoin (BTC) and ether (ETH) will coexist with tighter digital currencies like China’s digital yuan for some time to come, Changpeng Zhao, CEO of Binance, told Bloomberg on Monday.
According to Zhao, some of the key features of cryptocurrencies like bitcoin (BTC) – free use and limited supply – will not be offered by CBDCs. Ultimately, these are the key features users are interested in, he said.
Zhao said the differences between the two types of digital assets could make currencies issued by central banks unattractive to those engaged in cryptocurrency. Most central bank digital currencies will have more control, he said.
Unlike fiat currencies like the US dollar, the world’s largest crypto currency, bitcoin, has a limited supply, meaning there will never be more than 21 million bitcoins in the world. Many crypto-currency proponents point to the inflation fueled by money printing, and suggest that bitcoin could be a potential cure for the fiat currency disaster.
Zhao’s comments on the CDDC came at a time when the US has plans for a CDDC: The nonprofit Digital Dollar Project announced five Digital Dollar pilot programs on Monday. The organisation has partnered with accounting giant Accenture, a company that has been involved in the development of CBDC with the Central Bank of Sweden since 2019, to carry out trials over the next 12 months.
Despite the new efforts on digital dollars, Federal Reserve Chairman Jerome Powell reiterated last week that it is far more important to get digital dollars right than to be first. Powell has already raised significant concerns about CBDC, such as user privacy and security.
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