Stablecoin

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Jerome Powell

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<a style="color: #0000ff;" href="https://defi-planet.com/2022/01/what-are-cbdcs-and-why-are-they-being-discussed-lately/">Central Bank Digital Currencies</a> (CBDCs) have become a major point of interest worldwide. As digital versions of national currencies, they hold the promise to revolutionize payment systems, making transactions faster, cheaper, and more accessible. They could even play a major role in extending financial services to unbanked populations and improving costly cross-border payments. 
For instance, business-to-business (B2B) cross-border payments reached a staggering<a style="color: #0000ff;" href="https://www.fxcintel.com/research/reports/how-big-is-the-b2b-cross-border-payments-market?ref=jaredfranklin.com"> $39.3 trillion</a> in 2023, a huge expense CBDCs could help reduce. While this idea is far from new, research into CBDCs has gained significant momentum recently. 
Back in 2020, only 35 countries were actively exploring the development of a CBDC. Fast forward to today, and that number has jumped to 134, representing an impressive 98% of the global economy, according to the<a style="color: #0000ff;" href="https://www.atlanticcouncil.org/cbdctracker/"> Atlantic Council</a>. The rise of CBDCs aligns with the increasing digitization of finance and the need for governments to maintain control in an evolving financial world. 
However, while many countries are keen to explore the idea, the actual implementation of CBDCs is moving more slowly. Of those 134 exploring CBDCs, only 66 nations have advanced to pilot programs or other significant developmental stages. To date, only three countries—Nigeria, Jamaica, and the Bahamas—have fully launched CBDCs. 
<figure id="attachment_19137" aria-describedby="caption-attachment-19137" style="width: 100%" class="wp-caption aligncenter">
 <img loading="lazy" decoding="async" class="wp-image-19137 size-full" src="https://defi-planet.com/wp-content/uploads/2024/10/Number-of-countries-and-currency-unions-exploring-CBDCs-.png" alt="Number of countries and currency unions exploring CBDCs" width="1190" height="497" srcset="https://defi-planet.com/wp-content/uploads/2024/10/Number-of-countries-and-currency-unions-exploring-CBDCs-.png 1190w, https://defi-planet.com/wp-content/uploads/2024/10/Number-of-countries-and-currency-unions-exploring-CBDCs--300x125.png 300w, https://defi-planet.com/wp-content/uploads/2024/10/Number-of-countries-and-currency-unions-exploring-CBDCs--1024x428.png 1024w, https://defi-planet.com/wp-content/uploads/2024/10/Number-of-countries-and-currency-unions-exploring-CBDCs--768x321.png 768w, https://defi-planet.com/wp-content/uploads/2024/10/Number-of-countries-and-currency-unions-exploring-CBDCs--600x251.png 600w, https://defi-planet.com/wp-content/uploads/2024/10/Number-of-countries-and-currency-unions-exploring-CBDCs--750x313.png 750w, https://defi-planet.com/wp-content/uploads/2024/10/Number-of-countries-and-currency-unions-exploring-CBDCs--1140x476.png 1140w" sizes="(max-width: 1190px) 100vw, 1190px">
 <figcaption id="caption-attachment-19137" class="wp-caption-text">
 Number of countries and currency unions exploring CBDCs. Source: <a href="https://www.atlanticcouncil.org/cbdctracker/">Atlantic Council</a>
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</figure> 
For most other nations, launching a digital currency is still a distant goal.&nbsp; Many of them are cautiously advancing their CBDC initiatives, but these projects sometimes feel more like responses to hype than committed steps toward implementation. Experts estimate that global CBDC adoption could still be two decades away.&nbsp; 
<h2 id="span-style-font-weight-400-implementing-cbdcs-on-a-global-scale-isn-t-feasible-span">Implementing CBDCs on a Global Scale Isn’t Feasible</h2> 
The global rollout of Central Bank Digital Currencies (CBDCs) is facing major challenges, making it unlikely that they will become common anytime soon. Even though there is growing interest and research into CBDCs, strong public doubt and political issues are slowing down progress. 
In countries like the U.S. and Canada, what people think is playing a crucial role in deciding the future of digital currencies. A 2023<a style="color: #0000ff;" href="https://www.bankofcanada.ca/wp-content/uploads/2023/11/Forum-Research-Digital-Canadian-Dollar-Consultation-Report.pdf"> survey in Canada</a> found that 85% of participants would reject a digital Canadian dollar. 
<figure id="attachment_19136" aria-describedby="caption-attachment-19136" style="width: 100%" class="wp-caption aligncenter">
 <img loading="lazy" decoding="async" class="size-full wp-image-19136" src="https://defi-planet.com/wp-content/uploads/2024/10/Respondents-preference-to-use-a-digital-Canadian-dollar-in-the-future-1.png" alt="Respondents' preference to use a digital Canadian dollar in the future" width="801" height="316" srcset="https://defi-planet.com/wp-content/uploads/2024/10/Respondents-preference-to-use-a-digital-Canadian-dollar-in-the-future-1.png 801w, https://defi-planet.com/wp-content/uploads/2024/10/Respondents-preference-to-use-a-digital-Canadian-dollar-in-the-future-1-300x118.png 300w, https://defi-planet.com/wp-content/uploads/2024/10/Respondents-preference-to-use-a-digital-Canadian-dollar-in-the-future-1-768x303.png 768w, https://defi-planet.com/wp-content/uploads/2024/10/Respondents-preference-to-use-a-digital-Canadian-dollar-in-the-future-1-600x237.png 600w, https://defi-planet.com/wp-content/uploads/2024/10/Respondents-preference-to-use-a-digital-Canadian-dollar-in-the-future-1-750x296.png 750w" sizes="(max-width: 801px) 100vw, 801px">
 <figcaption id="caption-attachment-19136" class="wp-caption-text">
 Respondents’ preference to use a digital Canadian dollar in the future. Source:<a href="https://www.bankofcanada.ca/wp-content/uploads/2023/11/Forum-Research-Digital-Canadian-Dollar-Consultation-Report.pdf"> Bank of Canada</a>
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</figure> 
Most of this concern comes from fears about privacy. Many Canadians worry that a digital currency would lead to more government monitoring of their finances, which has made them stick with their current payment methods. As a result, the Bank of Canada decided to rethink its plans to create a digital currency. 
READ MORE: <a style="color: #0000ff;" href="https://defi-planet.com/2024/10/why-canadas-central-bank-is-halting-plans-for-a-digital-canadian-dollar/">Why Canada’s Central Bank is Halting Plans for a Digital Canadian Dollar</a> 
A similar scenario is playing out in the U.S., where scepticism toward CBDCs is very high. According to a <a href="https://www.cato.org/survey-reports/poll-only-16-americans-support-government-issuing-central-bank-digital-currency#americans-are-skeptical-cbdcs">Cato Institute poll,</a> only 16% of Americans supported the idea of a CBDC in 2023, with privacy concerns being the major reason for the opposition. Interestingly, just 28% of those polled were even aware of what a CBDC is. 
<figure id="attachment_19138" aria-describedby="caption-attachment-19138" style="width: 100%" class="wp-caption aligncenter">
 <img loading="lazy" decoding="async" class="size-full wp-image-19138" src="https://defi-planet.com/wp-content/uploads/2024/10/US-Citizens-and-their-stance-towards-CBDCs.png" alt="US Citizens and their stance towards CBDCs" width="729" height="436" srcset="https://defi-planet.com/wp-content/uploads/2024/10/US-Citizens-and-their-stance-towards-CBDCs.png 729w, https://defi-planet.com/wp-content/uploads/2024/10/US-Citizens-and-their-stance-towards-CBDCs-300x179.png 300w, https://defi-planet.com/wp-content/uploads/2024/10/US-Citizens-and-their-stance-towards-CBDCs-600x359.png 600w" sizes="(max-width: 729px) 100vw, 729px">
 <figcaption id="caption-attachment-19138" class="wp-caption-text">
 US Citizens and their stance towards CBDCs. Source: <a href="https://www.cato.org/survey-reports/poll-only-16-americans-support-government-issuing-central-bank-digital-currency#americans-are-skeptical-cbdcs">CATO</a>
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</figure> 
In response, governments are treading carefully with their plans for these currencies. U.S. Federal Reserve Chair Jerome Powell recently stated the U.S. is “nowhere near” launching a digital dollar. This hesitant stance is also seen globally; a<a style="color: #0000ff;" href="https://rpc.cfainstitute.org/en/research/surveys/2023/survey-central-bank-digital-currencies"> 2023 report from the CFA Institute</a> found that 34% of people in other countries oppose their central banks issuing digital currencies. 
Meanwhile, launching CBDCs would also require an overhaul of current financial systems, with new regulations, robust cybersecurity measures, and enhanced data protection. This might also be a good reason why global policymakers and financial institutions appear reluctant to implement these sweeping changes. 
RELATED: <a style="color: #0000ff;" href="https://defi-planet.com/2024/10/norways-central-bank-to-announce-cbdc-decision-in-2025/">Norway’s Central Bank to Announce CBDC Decision in 2025</a> 
<h2 id="span-style-font-weight-400-the-politics-at-the-heart-of-cbdc-development-span">The Politics at the Heart of CBDC Development</h2> 
CBDCs are increasingly entangled in political debates, especially in the U.S. Republican leaders, including figures like Donald Trump, have openly criticized digital currencies. Though some Democratic policymakers have cautiously explored CBDCs, the polarized landscape means that the rollout of a U.S. digital dollar is unlikely under any administration in the near term. 
This political divide, coupled with the logistical complexity of deploying CBDCs, complicates global adoption prospects. As long as CBDCs remain a contentious issue, it’s challenging to see their potential outweighing the significant roadblocks. 
<h2 id="span-style-font-weight-400-the-way-forward-span">The Way Forward?</h2> 
A more practical path in the digital currency landscape may lie with stablecoins, which offer many of the benefits associated with CBDCs while enjoying broader public appeal. Unlike CBDCs, which are issued by central banks and often perceived as government-controlled, stablecoins are privately issued and decentralized. This structure enhances their appeal to both consumers and businesses, presenting a more accessible and immediately implementable solution. By sidestepping the need for an extensive financial system overhaul, stablecoins can provide economic utility with fewer barriers to adoption. 
Today, the stablecoin market stands strong, with a <a style="color: #0000ff;" href="https://defillama.com/stablecoins">total capitalization of approximately $172.45 billion</a>. Transaction volumes from January 2022 to July 2024 show a sustained, growing interest, underscoring stablecoins’ expanding role in digital finance. 
<figure id="attachment_19139" aria-describedby="caption-attachment-19139" style="width: 100%" class="wp-caption aligncenter">
 <img loading="lazy" decoding="async" class="size-large wp-image-19139" src="https://defi-planet.com/wp-content/uploads/2024/10/Stablecoin-transaction-volumes-from-January-2022-to-July-2024-1024x564.png" alt="Stablecoin transaction volumes from January 2022 to July 2024" width="1024" height="564" srcset="https://defi-planet.com/wp-content/uploads/2024/10/Stablecoin-transaction-volumes-from-January-2022-to-July-2024-1024x564.png 1024w, https://defi-planet.com/wp-content/uploads/2024/10/Stablecoin-transaction-volumes-from-January-2022-to-July-2024-300x165.png 300w, https://defi-planet.com/wp-content/uploads/2024/10/Stablecoin-transaction-volumes-from-January-2022-to-July-2024-768x423.png 768w, https://defi-planet.com/wp-content/uploads/2024/10/Stablecoin-transaction-volumes-from-January-2022-to-July-2024-1536x846.png 1536w, https://defi-planet.com/wp-content/uploads/2024/10/Stablecoin-transaction-volumes-from-January-2022-to-July-2024-600x330.png 600w, https://defi-planet.com/wp-content/uploads/2024/10/Stablecoin-transaction-volumes-from-January-2022-to-July-2024-750x413.png 750w, https://defi-planet.com/wp-content/uploads/2024/10/Stablecoin-transaction-volumes-from-January-2022-to-July-2024-1140x628.png 1140w, https://defi-planet.com/wp-content/uploads/2024/10/Stablecoin-transaction-volumes-from-January-2022-to-July-2024.png 1600w" sizes="(max-width: 1024px) 100vw, 1024px">
 <figcaption id="caption-attachment-19139" class="wp-caption-text">
 Stablecoin transaction volumes from January 2022 to July 2024. Source: <a href="https://coinbase.bynder.com/m/1c89e383fea72368/original/Q4-2024-Guide-to-Crypto-Markets.pdf">Coinbase &amp; Glassnode</a>
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As it stands, it appears that the governments around the world recognize this. Many have <a style="color: #0000ff;" href="https://defi-planet.com/2024/10/south-korea-considers-fx-regulations-for-stablecoins-in-cross-border-trade/">started introducing regulations</a> specific to their issuance and distribution, indicating a significant shift toward more legitimization.&nbsp; 
As governments adapt their financial systems for a digital future, the hype around CBDCs may persist, but that doesn’t guarantee their success. There are no clear success stories yet, so the path forward for CBDCs remains murky. 
In the meantime, stablecoins will continue to thrive, capitalizing on their public acceptance and demonstrating the potential of digital currencies in today’s financial ecosystem. Whether CBDCs eventually take off or remain a niche project, the race toward digital currencies is clearly underway, albeit with no assured outcome. 
&nbsp; 
Disclaimer: This article is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.&nbsp; 
&nbsp; 
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The post <a href="https://defi-planet.com/2024/10/why-we-wont-see-cbdcs-everywhere/">Why We Won’t See CBDCs Everywhere</a> appeared first on <a href="https://defi-planet.com">DeFi Planet</a>.

Why We Won’t See CBDCs Everywhere

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