Bitcoin vs. CBDC: Competition or Coexistence?

The technology may seem quite similar. However, they belong to very different categories. Bitcoin is a citizens’ initiative running on a decentralized computer network. And CBDC is a version blockchain money fiat contractual. It’s fiat by another name. What is really changing is the underlying technology.

The problem with comparing Bitcoin and CBDC is that the category “CBDC” is very broad and ambiguous. What project are we talking about? For example, the digital yuan is very different from the Venezuelan Petro. The digital dollar still exists. There is also no digital euro. Of course, some research has been done. And there are some suggestions. However, a possible launch is still a long way off. So any comparison at this point is hypothetical and general I’m afraid. In other words, we cannot go into specifics. Because there is no concreteness (yet).

It doesn’t take a genius to know that this alleged rivalry between Bitcoin and fiat is more of an ideological feud than a concrete reality. A small minority indeed seek the supremacy of Bitcoin’s guardian. But that remains to be seen. In practice, Bitcoin and fiat exist in a mixed universe. And in many cases they complement each other. Popularity from stable coins It is very revealing in that regard.

Stablecoins are a bridge between fiat and cryptocurrencies. Unlike CBDCs, stablecoins are private initiatives. A token represents a deposit of fiat money (held by a private company). It’s a matter of convenience.

Stablecoins have played an extremely important role in the development of the cryptocurrency industry by acting as a point of access and stability. What will be the difference between a fully regulated stablecoin and a CBDC? It all depends on the type of regulation and the type of CBDC. However, we can assume that the difference will not be large. In any case, we will have less friction and more guarantees. What can be useful for Bitcoin.

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Over time, stablecoins have gained a lot of space that was previously only associated with Bitcoin. It is now much more convenient, for example, to buy coffee with a stablecoin than with Bitcoin. It is much more convenient for an employee to pay with a stablecoin than with Bitcoin. And so on. This is not something that is said on a whim. Anecdotal and statistical evidence points to this evolution in consumer preferences.

Money stability is very important in trading. Thus, stablecoins offer all the conveniences of a cryptocurrency like Bitcoin, but with the stability of a peg. In other words, they are the best of both worlds.

The P2p Bitcoin market has many benefits the gig economy, gray economy, parallel currency market, money transfers and other niches. However, the inclusion of stablecoins in these markets has had a positive impact on the stablecoins. In these niches, stablecoins have made significant inroads. Well, you have to remember that we are talking about practical users looking for solutions. If a better solution comes along, they accept that new solution. How simple.

Idiosyncratic bitcoin is much more stupid. If necessary, this user dies with the ship. First to die than betray the cause. But this group of die-hard fighters is anything but a noisy minority. The entire market is one that chooses its own destiny. And the market tends to choose the most efficient and convenient solution.

All the criticisms of fiat also apply to CBDC. I’m talking about privacy, governance and disclosure. However, in the case of CBCD, the underlying technology is much better. Therefore, we are talking about an improved fiat. Of course A public stablecoin has advantages and disadvantages. On the one hand, state currency control could be much more effective because technology allows it. Therefore, the temptation to indulge in excesses becomes stronger. On the other hand, the risk of bankruptcy disappears. I meanit would be a much safer USD sovereign stablecoin than USDT, BUSD or USDC. Because the token does not represent the private company’s deposits. The token itself is the government’s money. And the issuer guarantees support.

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The defender of absolute privacy will suddenly have a problem with CBDCs in the same way they have problems with e-money from banks today. This user will definitely avoid hoarding CBDC and stay away from government issued instruments. Nevertheless, The rest of the population will surely accept CBDC without major drawbacks. In fact, the update will most likely come as an improvement.

Coexistence, whether we like it or not, is inevitable. Y competition will be limited to different tools being better or worse than others for different purposess. Suddenly, a pension fund manager needs to have a certain percentage of cash in their accounts in order to make monthly payments. And its board, feeling pressure from customers, decides that CBDC is the safest way to go. However, an international company with a large number of informal workers may want to use a stablecoin to pay for concerts provided by the accountant. And someone else might decide to make all payments in Bitcoin because that practice suits their cause and ideology. Valid.

Bitcoin: investment or form of payment? The fighter says one thing. The market says otherwise. What do we believe? As investors, CBDCs do not compete for Bitcoin. Just as CBDCs do not represent competition for shares in Tesla or Apple. personally, I am most concerned about the future of stablecoins. How will regulation affect stablecoins? How will a fully regulated stablecoin differ (in practice) from a CBDC?

In the case of the United States, regulation of stablecoins will certainly come first than CBDCs. However, we do not yet know the details of this regulation. How strict will the regulation be? Will it be as strict as bank regulation? We do not know. But suddenly the regulators will take a middle ground. User privacy will be protected to some extent. However, minimal transparency will be required. Fair use will be encouraged. However, some controls will also be in place to prevent criminal activity. In other words, In the case of Bitcoin, other cryptocurrencies, stablecoins, have regulatory days…

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