The difference between cryptocurrencies and central bank digital currency (CBDC).
Both cryptocurrencies and central bank digital currencies (CBDCs) are currently widely discussed topics in the financial world. However, what many do not know is that these two concepts differ significantly from one another. In this article, we will show you the key differences between cryptocurrencies and central bank digital currencies. Learn how their functionalities, security, and roles in the financial system differ, and what implications this could have for the future of money.
“No Cash, No Problem” is the motto under which the central bank of Jamaica has issued its digital currency. In fact, you no longer need cash, a bank card, or a bank account when using the digital central bank currency with your smartphone. This innovative payment method provides all of us with the opportunity to pay or transfer money directly anywhere and anytime without relying on traditional banking services. However, the digital central bank currency differs significantly from cryptocurrencies, as it is issued and regulated by a state institution and is not based on decentralized technologies like blockchain.
Cryptocurrencies like Bitcoin have been around for several years. They can be described as "decentralized" or "private" money, as they are not issued and controlled by state institutions like the Swiss National Bank (SNB) or the European Central Bank (ECB). Unlike traditional currencies, which are issued and regulated by a central authority such as a central bank, cryptocurrencies are based on decentralized technologies like blockchain. These technologies allow users to conduct transactions directly with one another, without relying on intermediaries like banks. These characteristics make cryptocurrencies an innovative and alternative means of payment used by a growing number of people worldwide. Here, you can learn more about the exciting world of cryptocurrencies.
However, central banks also want to take advantage of the benefits of digital money transactions. In many countries worldwide, including Germany, they are therefore working on their own solution: the introduction of (CBDC). They aim to facilitate money transactions and make them accessible to everyone with internet access. Their idea is based on the concept that everyone would have a universal account directly with the central bank, eliminating the intermediary role of private banks. Central Bank Digital Currencies are also fiat money, meaning they are supported by state institutions and recognized as legal tender. By introducing digital central bank currencies (CBDCs), central banks could create more efficient payment processing systems while promoting financial inclusion. This digital innovation aims to modernize the traditional financial system and meet the needs of an increasingly digital world. Information about the system can be found here. They can be issued, controlled, and monitored by the central bank (SNB or ECB) in unlimited amounts and are considered legal tender.
Digital central bank money is already under discussion or even in circulation in many countries. However, there are some key differences from cryptocurrencies that should be noted. Let's take a closer look at them:
| Cryptocurrencies | Central Bank Digital Currencies (CBDC) | |
|---|---|---|
| Currency system | decentralized | centralized |
| Emissione / Controllo | It is "private" money: cryptocurrencies are democratically shaped, controlled, and operated by the community. There is no central authority that supervises and organizes the trading. | These are issued by central banks and supported by governments. The central bank decides on the money supply, interest rates, etc. The state control and lack of oversight from central authorities pose a risk for political influence. For example, certain transactions can be blocked, or your savings can be individually subjected to a negative interest rate. |
| Money supply | Some cryptocurrencies, such as Bitcoin, have a fixed upper limit: The reason is to ensure that the available supply does not get out of control, preventing inflation. | Currently, there is no limit. The central bank can change the money supply at any time, for example, to maintain the stability of the currency system or to control inflation rates. |
| Coverage | They have no connection to the usual fiat currencies, such as the Euro. Since they are not backed by fiat money or a commodity like gold, they are often volatile. This means their price can fluctuate significantly and is determined by the free market. | CBDCs have the same value as their corresponding physical currencies and could be exchanged 1:1 for banknotes. The banknotes themselves, that is, the fiat money, are also not backed. The value is based on trust in the currency. |
| Target audience | For all people with internet access worldwide, including those who currently do not have a bank account or access to the banking system. | For all people worldwide. A bank account is not required to use the CBDC. |
Currently in circulation are CBDCs in the Bahamas with the Bahamian Sand Dollar, in Jamaica with the Jam-Dex, in China with the digital Yuan, and in Nigeria with the eNaira. Interestingly, the eNaira has seen limited adoption among the population, partly due to a general distrust of the ruling elite. This development shows that the acceptance of digital central bank currencies is influenced not only by technological factors but also by social and political aspects.
Countries like India, Singapore, Nigeria, Ghana, France, Uruguay, Saudi Arabia, the United Arab Emirates, and Canada are also in the project phase. Feasibility studies are being conducted by Hungary, Ukraine, Turkey, Sweden, Norway, and other countries worldwide. This broad international interest and activity underscore the significance and potential benefits of digital central bank currencies as tools for modernizing the financial system and promoting financial inclusion.
This increasing interest and global activity regarding digital central bank currencies highlight the potential benefits and opportunities associated with this innovative technology. From the Bahamas to China, and from Nigeria to Canada, central banks worldwide recognize the potential of digital currencies to improve payment processing, enhance financial inclusion, and increase the efficiency of the financial system. While countries like China with the digital Yuan are already in an advanced phase of implementation, others like Switzerland with the SNB, the European Central Bank (ECB), or the Federal Reserve Bank of the United States are still in the discussion and evaluation phase. It will be interesting to observe how these developments progress and what impacts they will have on the global economy and finance.
Dieser Artikel stellt weder eine Anlageberatung oder eine Aufforderung zum Kauf oder Verkauf von digitalen Assets oder anderen Finanzinstrumenten oder zum Abschluss einer anderen Finanztransaktion dar. Der Hauptzweck dieses Artikels besteht darin, allgemeine Informationen zu liefern. Es werden weder ausdrücklich noch stillschweigend Zusicherungen oder Garantien bezüglich der Fairness, Genauigkeit, Vollständigkeit oder Richtigkeit dieses Artikels oder der darin enthaltenen Meinungen gemacht. Es ist daher ratsam, kein Vertrauen in die Fairness, Genauigkeit, Vollständigkeit oder Richtigkeit dieses Artikels oder der darin enthaltenen Meinungen zu setzen. Es besteht die Möglichkeit, dass einige Aussagen in diesem Artikel zukunftsgerichtete Erwartungen enthalten, die auf unseren gegenwärtigen Ansichten und Annahmen basieren. Diese Aussagen sind mit Unsicherheiten verbunden und können zu tatsächlichen Ergebnissen, Leistungen oder Ereignissen führen, die von den in diesem Artikel getätigten Aussagen abweichen.
Die Cryptonow Group und ihre Tochtergesellschaften, beratende oder vertretende Personen können in keiner Weise für diesen Artikel haftbar gemacht werden.
Es ist wichtig zu beachten, dass eine Investition in digitale Assets neben den potenziellen Gewinnen auch Risiken birgt.
