Central bank digital currencies, or CBDCs, represent the ultimate ratification of digital finance: Its adoption by the most venerated guardians of the international monetary architecture.
Why it matters: Crypto-evangelists often talk about CBDCs in awed terms. But it’s far from clear that the bitcoin-and-ethereum crowd would ultimately benefit from money going digital.
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How it works: The country with by far the most advanced digital currency is China — but eCNY, as the Chinese digital currency is known, is pretty much the exact opposite of bitcoin and everything it stands for.
It doesn’t use blockchain technology. Instead, the ledger of who owns what is closely held at the Chinese central bank — and nowhere else.
While bitcoin is based on zero trust, eCNY requires full trust of the Chinese monetary authorities. If it goes global, then China will at all times know exactly how much of its currency you possess — and could zero you out for any or no reason.
While bitcoin is a deflationary currency designed to increase in value over time, eCNY is an inflationary currency designed to decrease in value over time. In fact, in its current incarnation, it expires worthless if it isn’t spent within a few weeks.
The big picture: eCNY is an