Marshall Islands to launch CBDC on Algorand Blockchain with the help of SFB Technologies
Central bank digital currency (CBDC) is the digital form of fiat money that will be generated by the country’s central bank and can be used as legal tender. As the world embraces technology and a cashless approach, several central banks around the world are exploring whether or not they could issue a CBDC to complement cash.
Benefits of CBDC usage
Let’s look at some of the potential advantages of CBDCs:
- Remove the intermediaries: Fiat transactions will require you to heavily depend on intermediaries such as banks and other financial institutions. CBDCs will allow you to directly transact with the other party in real-time.
- Banking the unbanked: CBDCs could potentially be a very viable instrument for financial inclusion. Every citizen can be provided with a basic public address to hold their coins.
- Improved Transparency:The CBDC is built using the blockchain technology which can be used to trace every single coin back to its very source. There are two obvious advantages of this increased transparency – easier auditing and combatting money laundering.
- Safety of payments systems: A secure, interoperable, and standard payment system issued and governed by a Central Bank can help increase trust in the entire national payment system.
- Seigniorage income preservation: Sudden disappearance of physical cash, could lead to a dramatic reduction of seigniorage income for governments. The issuance of CBDC would lead to seigniorage income preservation.
What is the current status of global CBDCs?
While some of the central banks are skeptical about CBDCs, certain governments are pretty enthusiastic about it. The U.S. Federal Reserve, for example, doesn’t seem to want to do anything CBDCs. Jerome Powell, the Fed Chairman, said back in November that while the bank is closely monitoring the situation, they are not considering their own CBDC.
However, several countries like China, Britain, Sweden, and Switzerland are working on their version of a CBDC. China is the closest to becoming the first to introduce a digital renminbi. Another country that has made significant strides in launching its CBDC is the Marshall Islands.