During 2020, many countries around the world were in conflict with their digital versions of their currencies, known as central bank digital currencies or CBDCs. According to Jake Yukum Pyat, co-founder of crypto project Decred, the crypto industry still has an edge even though most countries have launched CBDCs.
“I expect many nation states to create their own digital currencies in the not too distant future, but there is a key difference between central bank digital currencies and cryptocurrencies,” Yukum Bit told Cointelegraph. “ Cryptocurrencies like Bitcoin and Decred are basically fairer systems than fiat currencies, so while central bank digital currencies can use many of the functions of a cryptocurrency, they cannot compete for fairness. ”
China took the lead in CBDC development last year, while the US took a slower approach. Recent events indicate a growing awareness of the importance of CBDC development in the United States. The central bank’s digital currency is most likely digital copies of the government dollar, although many details have yet to be decided.
As Yokom-Piatt mentioned, cryptocurrencies form different basic structures, depending on their origin and their composition. For example, Bitcoin (BTC) remains independent of currencies and national borders, governed by computer code and miners.
“Based on the fact that cryptocurrencies are clearly fairer with imminent release plans and intangibles, I expect CBDC to be relatively unaffected as it is just a digital thing,” said Yokom-Piatt.
On the other hand, stablecoins may, logically, feel a greater impact than the world governed by CBDC, as the main purpose is to digitally represent fiat currencies on the blockchain pegged to a specific value. The future of the original cryptocurrency stack may still depend on future cryptocurrency specifications.
The co-founder of Decred noted that “depending on the actions you can take with your CBDC assets, they could render stablecoins pretty much obsolete.” “If there are many restrictions on the central bank’s foreign exchange assets, stable currencies can compete on the flexibility front.”
Stable currencies like USDT and USDC operate on a blockchain and allow multiple transactions and storage space. USDC, in particular, was widely used in the decentralized financial sector, or DeFi, for cryptography in 2020.