A new study by financial giant Deloitte highlights the potential of Bitcoin (BTC) as the basis for creating a cheaper, faster and more secure electronic fiat currency or central bank digital currency (CBDC) ecosystem.
An analysis by Deloitte titled “Government-Backed Cryptocurrency” pointed to the need for a complete overhaul of the traditional securities ecosystem in order to overcome the looming problems of “slow, misguided and costly operation of other high-tech industries.”
However, the report identifies five key areas where Bitcoin can help significantly improve traditional fiat currencies: speed, security, efficiency, cross-border payments, and collaboration with other payment participants:
“With the ability […] to do this without the day-to-day operational needs of a central organization, whether commercial or federal, the results can be truly transformative.”
Similarities and differences between CBDC and Bitcoin. Source: Deloitte.
Pointing out the differences between BTC and government-issued central bank digital currencies, Deloitte’s analysis reiterates one of the most important inflationary features of fiat currency, saying that central bank digital currencies do not control the money supply on the public ledger and that central authorities can determine the value of CBDCs. .
According to the analysis, governments that are the first to introduce a nationwide central bank digital currency will have an early advantage in terms of influencing the use of their local currency in international markets and in trade.
In the CBDC environment, Deloitte suggests that cryptocurrency exchanges will maintain their existing position as an intermediary to be used to convert “users’ cryptocurrencies to fiat currencies when trading in different currencies and will require an exchange fee.” In such a scenario, banks will act as custodians of a distributed ledger that will compete with other miners to process transactions and earn rewards.
Finally, the analysis states that while CBDCs will not act as a one-to-one alternative to bitcoin and other cryptocurrencies, the popularization of CBDCs will open up additional options for users to choose the most suitable payment method and concludes as follows:
“[Bitcoin] may eventually create a range of new opportunities […] that will transform the existing payment system into one that is faster, safer, and less costly to operate.”
Related: Central Bank of Jamaica Sends Jam-Dex CBDC to Early Users
While many jurisdictions have joined the fight to implement their own CBDCs, widespread use is key to successful implementation.
As part of this effort, Jamaican Prime Minister Andrew Holness announced that the first 100,000 Jamaicans to use the country’s CBDC, Jam-Dex, will receive a free $16 payout in hopes of widespread adoption.
Approximately 17% of the Jamaican population is left without a bank, Cointelegraph reports, and with the launch of the CBDC, the Jamaican government plans to encourage low- and middle-income citizens to join the national banking system.