With the technological advancements brought by cryptocurrencies, digital currency implementation projects from different countries have been launched. Many of these projects are still in the most primitive stages where they have to ask for directions, do research, and nothing else. Moreover, so far none of these countries have openly declared that they are successful in developing.

Today, the world’s major economies have started to consider and actively promote the research and development of central bank digital currency. According to recently released reports, around 86% of central banks in 65 countries have conducted internal research on digital currencies.

This same study revealed that from 2019 to 2020, the number of tests and surveys on cryptocurrencies by central banks increased from 42% to only 60% during this period and for this study it was not taken into account. account 2021, which was one. years with the greatest breakthrough in cryptocurrency issues.

According to the public information that has been processed so far, the banks that have opened investigations regarding cryptocurrencies are the United States, United Kingdom, France, Canada, Sweden, Japan, Russia. , South Korea, Singapore, India and of course the European Central Bank.

These countries and banks have announced on various occasions their intention to start studying the possibility of developing a digital currency supervised by banks. From now on, the interest of the digitization of traditional economic structures is greater, but little is linked to decentralized cryptocurrencies. A big part of the plan is to develop its own cryptocurrencies so that it can combat the reach that cryptocurrencies like bitcoin are taking.

At present, there is not much information on the status of the central bank projects mentioned above. In addition, no details are available on when the investigations started. Many banks have likely conducted this investigation in secret and are at an advanced stage. But still, the development of a central bank digital currency takes a long time, a clear case is that of China.

Central banks must reorganize

For central banks and the global economy, it is very important to renew oneself. The point is that many central banks reject the new alternatives to some extent. It is clear that cryptocurrencies are the present and the future of the global economy, but banks are taking a step back from these projects to find alternatives that are much safer, but above all controllable.

For many analysts, the future of the economy lies in the fusion of crypto and digital. This theory postulates that very soon cryptocurrencies will be able to be bought and sold in banks with higher security standards. It’s already started happening in some banks around the world, but the plan is for it to be global. The point is that few banks fully agree with this situation.

For banks, it’s important to stay in control. This enables them to prepare for crises, to take preventive measures and to ensure, to a certain extent, economic stability. What is happening with cryptocurrencies is quite the opposite. Cryptocurrencies go up and down constantly and there are some pretty big gains and losses. This is why central banks reject cryptocurrencies, but try to strike a balance between innovation and security, and this is where central bank digital currencies come from.

Are central bank digital currencies the savior?

There has been a lot of talk for some time about the collapse of the global economy. This fear has become closer and closer with the arrival of the pandemic caused by the coronavirus and the inflation experienced by countries which previously had sufficient economic stability. For this reason, specialists in the subject believe that digital currencies from central banks could save the economy.

As we mentioned earlier, the need for innovation is present. And while many consider central bank digital currencies to be the future of the economy, a large number of scholars believe that too much should not be expected from these types of currencies, taking the case of the Chinese digital RMB as example.

Of all the central bank’s digital currency projects, the digital RMB is the one that has been much more public and followed by cryptocurrency enthusiasts. While this pilot plan has come a long way, it has yet to reach as much as the world is hoping for. So far, progress has been steady and small amounts of money have been involved, but it has taken longer than expected.

It should be noted that this project has been in the works for a long time, and it was not until July of last year that the People’s Bank of China first released the white paper that covered the project. In it, it was revealed that there are 1.32 million digital renminbi pilot scenarios covering different current payments such as catering, transportation, shopping, consumption, indicating that the next new digital currency could be used. for all daily user activities.

China’s determination to bring this cryptocurrency to market is pretty clear. In fact, it was the first country to make sufficient progress with a project of this magnitude. As a result of China’s release of the digital RMB process, other countries began to observe carefully, and in order not to stay in the past, they also began to investigate.

The Bank for International Settlements recently said that most of the world’s monetary regulators have started to consider taking action similar to China’s, but none are as advanced as this country. Indeed, the United States, which is the main competitor of China, did not make too many comments on this subject, but the question of the Digital Dollar has become more and more recurring.

Digital currencies could change the economy

While many central banks are somewhat resistant to change, digital currencies have the ability to forever change the traditional economic structure. It is clear that governments and financial regulators are interested in keeping things as they are with the intention of protecting the system, but little by little, if they are not updated, the risks of failure are. quite high.

While governments recognize the need to innovate, for many decentralized cryptocurrencies are not an option. Cryptocurrencies such as bitcoin, although they offer greater convenience to users, also have much higher levels of privacy which prevent the traceability of transactions and these cryptocurrencies can be used for illegal activities.

Just a few hours ago, data on the level of illegal activity related to cryptocurrencies was released and the sum stands at over $ 14 billion, a figure that has increased significantly during 2021. The biggest fear of regulators and banks is that if the market gets much bigger it will be virtually impossible to control and monitor.

In the case of physical or digital fiat currencies, but by traditional standards, they continue to have different advantages such as stability which gives users much more security since losses or devaluations, although considered, do not are not as dramatic as those in cryptocurrencies at least. not in such a short time.

What regulators are looking for right now is to give users more options with a digital currency that they can comfortably access, but that offers the same benefits as traditional money. This is why the central bank’s digital currency projects are not looking to replace fiat money, they want to innovate, but to maintain standards.

Central bank digital currencies represent various advantages such as reliability, stability, speed and efficiency. What is a problem is the time it takes to develop. China has been working on this project for some time and there is no exact launch date yet. In 2021, it was speculated that it could hit the market at the end of the year, but that didn’t happen, so 2022 could be the big opportunity.

The crackdown on cryptocurrencies is coming

While each country might take a different approach, the chances of restrictions for cryptocurrencies are quite high. A clear example is that of China, which, although it never had a very positive attitude towards cryptocurrencies, after the announcement of the digital RMB project, the crackdown on cryptocurrencies was stronger.

The reasons given by the regulators were related to security concerns, but different market analysts claim that the real reason the country bans all activity related to cryptocurrencies is the interest in their project being much more successful by eliminating them. great enemies, decentralized crypto-currencies.

Another example is India which recently announced that it would start working on a central bank digital currency and with this upcoming regulations have also been announced to ban cryptocurrencies. Also, it has been predicted that the trend in 2022 will be regulation and restriction, so hard times may be ahead for the market.

Source: Fortune China