Let’s look at our financial system from a timeline perspective.
Paper banknotes appeared in the Middle Ages in China, and seven hundred years later, in the late Middle Ages, they appeared in Europe. Since then, our financial relationships have been based on this medieval financial instrument.
In the mid-70s of the last century, the technological development of society contributed to the emergence of non-cash money. From that moment on, like Yin and Yang, non-cash and cash forms of money became one. What is impossible with one form of money is easily solved with another form of money. This allows them to successfully complement each other and provide all the needs for money precisely at the level of technological development of the society for which they were created. This is the dual nature of money.
At the moment, there is another round of technological evolution driving society to a new digital level. Central banks have rushed to the chase for central bank digital currency (CBDC), realizing that without a digital payment network, it is impossible to enter the digital financial future.
However, instead of an innovative financial instrument, central banks got a strange financial hybrid: Medieval — Industrial — Digital (cash — non-cash — digital CBDC).
Because of this, the expected benefits of digital CBDCs only work within the CBDC payment network. We are talking about reducing the cost and increasing the speed of digital transactions, as well as the availability of international payments, when using CBDC.
A fiat monetary system virtually negates the expected global benefits of digital CBDCs that can be obtained through smart contracts, such as regulation of interest rates below zero, automatic maintenance of a given level of deflation/ inflation of the national currency, etc.
Digital CBDCs still suffer from all the “diseases” of digital money:
There is only one way to “turn on” the global advantages of blockchain technology for the monetary system as a whole and completely eliminate the disadvantages of digital money. It is necessary to remember the dual nature of money and connect blockchain-based central bank digital money (CBDC) with blockchain-based central bank cash (CBDC Cash).
“Is Hybrid the new normal?”
Thomas Moser, Alternate Member of the Governing Board, Swiss National Bank
Thanks to blockchain technology, central bank cash will have an incredible number of innovative features:
On the one hand, the creation of CBDC Cash will require a change in the architecture of the CBDC payment network, the introduction of quantum protection of the CBDC blockchain, the connection of peripheral banking devices to the CBDC payment network, and the adaptation of cash production technology. However, the fact that a digital CBDC without CBDC Cash will never be able to evolve into a full-fledged monetary system of the state of the future will fall on the scales.
Advantages of Blockchain-Based Cash (Cryptobanknotes)
Cryptobanknotes are a unique booster, providing both uniform and individual benefits for each type of blockchain-based digital money (for cryptocurrencies, stablecoins and CBDC). The uniform benefits include ...
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