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What Is Central Bank Digital Currency?

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Bitcoin’s current value is approximately 70% less than its all-time $69,000 high in 2021. This illustrates one of the most significant issues with cryptocurrency: instability.

A person holding a gold coin representing Bitcoin, a digital currency.

Volatility aside, Bitcoin was designed with many advantages it still carries; it decentralized transactions from banks, and enabled faster international trade.

But Bitcoin’s decline in value seems to be a precursor to a government-backed digital currency. For example, the US is already researching the introduction of the digital dollar. Whether you’re a crypto miner already or have never heard of the term, a central bank digital currency will affect you.

What is central bank digital currency (CBDC)? It’s time to learn before the revolution happens under your nose, so you can decide on the best place to put your money into for your retirement before the changes begin.

What Is Central Bank Digital Currency?

A central bank digital currency is a fiat currency backed by the issuing central banks and governments. Like physical cash and coins, it’s not connected to a tangible commodity like gold.

In the long term, the issuers’ likely goal is for digital currency to replace physical currency. It will be used in the same way as cash and coins. This new fiat money will be a digital payment method for everyday transactions.

Why CBDC Is Popular

What’s the main draw of phasing out physical currency in favor of digital? In a nutshell, digital is easier and cheaper.

For example, international transactions today typically come with a delay. Depending on the banks involved, transaction size, and sending and receiving parties, it can take days. Taking your major currency digital can cut this down to minutes, if not seconds.

On a small scale, this helps individual users, but the implications are far more significant for large corporations and governments. As they frequently send and receive large sums overseas, making this process more efficient will have a huge impact.

This efficiency applies to all transactions. Even domestic transactions through payment apps can take a couple of hours. Cutting this down optimizes cash flow for all parties.

Less spending on value storage is also required. As it’s a fiat currency, the money spent storing and securing physical commodities can be reduced.

A picture of the US Dollar with the text digital currency on top of it.

What Makes CBDC Different

These benefits all apply to cryptocurrency as well. What makes CBDC stand out from previous digital currencies and represent a significant paradigm shift is its backers.

CBDC is issued and managed by central banks or governments. This takes out a huge risk factor associated with cryptocurrency.

The majority of cryptocurrency is decentralized, with no managing party setting the value, so it can unpredictably spike or drop in value depending on demand.

Instability like this has made some shareholders millions. But it’s impractical for widespread usage. For example, how can anyone confidently spend their cryptocurrency if tomorrow it may be worth double, or even ten times as much?

CBDC should remove this unpredictable element, as the value is managed by the issuing bank or government. In most cases, it will likely mirror the exact value of the local currency. Long term, this provides stability for shareholders and the general populace alike.

Disadvantages of CBDC

Proponents of CBDC suggest it has the advantages of cryptocurrency without volatility. However, there are several other drawbacks that will have a day-to-day impact, especially on individuals.

Privacy and Anonymity

Many citizens, particularly in the West, highly value their right to privacy. Original cryptocurrency developers knew this and allowed users to keep transactions anonymous. But CBDC will be different.

When we draw cash from an ATM, there is a transaction record by account, location, and amount, but there’s no way for banks and governments to track where and when we spend our physical cash and coins. This allows for anonymity in all physical transactions.

Without that, banks and governments will be able to monitor every transaction each person, business, or organization ever makes. There will be a digital trail of all banking transactions we ever make. And authorities cutting off access to all funds becomes much easier.

Some say that this is an unfounded concern, as so many of our transactions are already digital payments. But for those who value anonymity, CBDC erasing it is a serious concern.

Cybersecurity

Banking institutions already have some of the highest-level cybersecurity on the planet. But the more that currency becomes digital, the more it’ll need to be defended. And with digital currency, the risk of hackers clearing accounts becomes more real.

A person looking at a picture of their secured digital assets.

Banks and governments won’t remove physical currency until they feel they have adequate cybersecurity. But the amount it’ll cost to defend these systems could cost just as much if not more than the value storage already does.

A More Stable Choice

The US government is expected to introduce access to the digital dollar in two stages. The first stage involves wholesale access, allowing corporations to access the available options. Next is retail, or access for the average person to use in daily transactions.

Whether the move is a success or not, it will likely cause instability. In times of economic uncertainty, people flee to obtain ever-stable precious metals, increasing their worth.

While the world of crypto promises highs and lows, and CBDC impact is yet to be seen, precious metals are consistently reliable. During recessions or other crises, gold almost always increases in value. It’s a long-term way to secure your wealth and set up a prosperous retirement.

Now is the time to acquire commodities like gold, silver, and platinum, before the masses do. This ensures your assets are secure and can gain real value over time. And we’re here to help you do just that.

Get Precious Metal IRA Advice Today!

What is central bank digital currency? It’s a huge change that’s coming sooner than most think. However, as the age of the digital dollar unfolds, the astute will acquire something more tangible to see them through uncertainty.

A precious metal IRA is the most reliable option today. We’re here to help everyone through the transferring IRA to precious metals IRA process. Our team will walk you through each step, from creating your account to deposits and rollovers.

Our team’s expertise ensures you choose the option best suited to you. Talk to us today to secure your assets!