Deloitte’s analysis shows how Bitcoin can help traditional fiat currency dramatically improve in terms of speed, security, efficiency, and cross-border payments.
A new study from financial services giant Deloitte highlights the potential of Bitcoin (BTC) as a foundation for creating a cheaper, faster, and more secure ecosystem for electronic fiat currency or central bank digital currency (CBDC).
Deloitte’s analysis, titled State-Sponsored Cryptocurrency, pointed to the need for a complete redesign of the traditional fiat ecosystem to overcome looming problems of being “slow, error-prone and expensive relative to performance in other high-tech industries.”
However, the report points to five key areas where Bitcoin can help traditional fiat currency dramatically improve, such as speed, security, efficiency, cross-border payments, and collaboration with other payment participants. According to the report, this is possible “With the potential […] to do it without the daily operational need for a centralized organization, be it commercial or federal, the result could be truly transformational.”
Main Inflationary Features of Fiat Currency
While unveiling the various differences between BTC and state-issued CBDCs, Deloitte’s analysis reiterates one of the main inflationary features of fiat currency, stating that CBDCs do not have a limit to the money supply contained on the ledger and that centralized governments can define the value of the CBDC.
According to the analysis, governments that are the first to implement a CBDC at the national level will have a head start in influencing the use of their local currency in international markets and operations.
In an environment with a CBDC, Deloitte envisions cryptocurrency exchanges maintaining their current position as facilitators to be used in converting “users’ cryptocurrencies into paper currency when transacting between different currencies, and charging an exchange fee in return. In such a scenario, banks will act as custodians of the distributed ledger who will compete with other miners to process the transactions and collect the reward.
Some Conclusions
Finally, the analysis states that, although CBDCs will not serve as the only substitute for BTC and other cryptocurrencies, the greater adoption of them will open an additional option for users to choose the most appropriate means of payment. The analysis concludes that, “[Bitcoin] could ultimately spawn a series of new opportunities that would […] transform the current payments system into one that is faster, more secure, and less expensive to run.”
Although many jurisdictions have joined the race to implement in-house CBDCs, one of the key factors for their success is mass adoption. As an example, it is worth mentioning the case of Jamaica.
In this effort, Jamaican Prime Minister Andrew Holness announced that the first 100,000 Jamaican citizens to use the country’s CBDC, Jam-Dex, would receive a free $16 payment in the hopes of promoting the adoption of the currency.
As Cointelegraph reported, approximately 17% of the Jamaican population remains unbanked, and with the launch of the CBDC, the government plans to encourage low- and middle-income citizens to integrate into the national banking system.
By Audy Castaneda
