Bitcoin could form the backbone for CBDCs, according to a new report – Business Insider India

According to the report, titled State-Sponsored Cryptocurrency, CBDCs will require a redesign of the traditional monetary ecosystem. And Bitcoin can help in five key areas speed, security, efficiency, cross-border payments, and collaboration with other participants.

What would happen if we combined the best attributes of the technology of cryptocurrencies with the features of an established fiat currency under the sponsorship of a central bank? The result very well may just be a new method of handling payments that would revolutionize the current system. With the potential to reduce costs, reduce errors, speed the transfer of money, balance privacy with anonymity, and do it without the day-to-day operational need for a centralized organization, whether commercial or federal, the result could truly be transformational.

Except from Deloitte 2022 Report State-sponsored cryptocurrency

Indias Finance Minister, Nirmala Sitharaman, said that the country will be issuing a CBDC soon. A CBDC is the legal tender issued by a central bank in a digital form. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. Only its form is different, T Rabi Shankar, deputy governor of the RBI, said in a speech in July last year.

In fact, on February 10, the Economic Times reported that the RBIs upcoming CBDC may not be based on blockchain technologies at all.

On March 9, US President Joe Biden also issued a historic executive order that directed the Federal Bank to explore the possibility of issuing CBDCs. Bidens order also noted that impact cryptocurrencies have on the environment, and called for responsible development, design, and implementation of cryptocurrency.

To be sure, Bitcoin isnt the only crypto to have faced such concerns. The premier cryptocurrency is based on a system of mining called proof-of-work (POW), under which every miner is rewarded for being part of the system, and in turn, raises the overall electricity requirements. Any cryptocurrency that has a large enough following and is based on the system could be under the radar of regulators.

According to the Cambridge Bitcoin Electricity Consumption Index, Bitcoin consumes over 132 TWh of power every year, which is higher than many small countries. Earlier this week, the European Parliament voted against a ban on POW cryptos, though regulations around the use and mining of cryptocurrencies are still expected.

The Swedish Riksbank, which is the oldest bank in the world, also began its CBDC project in 2017. The pilot for this took place in 2020 and was extended to February this year. Swedens CBDC is called e-krona right now.

Smaller nations like the Bahamas have also issued CBDCs, called the Sand Dollar.

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Bitcoin could form the backbone for CBDCs, according to a new report - Business Insider India