Digital currencies can help governments reduce financial fraud. According to Sheila Warren, privacy should become part of the design of digital currencies.
Sheila Warren said that “all countries should consider central bank digital currencies (CBDCs) and that not doing so is a serious mistake.” The Head of Blockchain, Digital Assets, and Data Policy at the World Economic Forum gave that opinion in recent days.
Warren and Cuy Sheffield, head of Visa Crypto, agreed that all central banks in the world should consider CBDCs. They said that, after a timely evaluation, these financial institutions will determine the suitability of the project in their country or region. In the study, the latter will contemplate the cultural, economic, legal, and technical factors involved in the development of their digital national currencies.
Eighty percent of 66 central banks are working on CBDCs, which makes them a reality in the world. Around 40% of these financial entities are already experimenting with the idea and design of their particular projects. The figures indicate that there could be a season of developments in the countries, with China leading the way with its digital yuan. However, Warren and Sheffield do not believe that these projects will establish the foundations of new world order.
Many countries are considering creating their national digital currencies, but 44% of central banks are in the midst of legal uncertainty. That limits their possibilities to issue and handle these types of currencies. For that reason, most of these financial institutions may issue digital currencies in the short and medium-term.
According to Federal Reserve Chairman Jerome Powell, the United States has accelerated its exploration of the possibility of issuing a digital dollar. In this regard, Warren said that an American digital currency can solve two specific problems. She believes that it would help reduce fraud since the money would be easier to track. Besides, it would be possible to monitor it until it reaches the hands of those who should receive it. She also believes that it would be useful for making scheduled payments, which would allow governments to have more control over their spending.
Warren noted that the protection of private data is an element related to the design of each CBDC. She said that it is possible to incorporate a certain amount of privacy into any particular project, depending on the decision of each issuer.
Bitcoin amid Massive CBDC Issuance
Warren and Sheffield also spoke about how the issuance of central bank digital currencies around the world would affect Bitcoin. They clarified that Bitcoin and CBDCs are completely different value proposition.
Regarding Warren, she believes that Bitcoin and CBDCs belong to different ecosystems and have different functions and purposes. She said that central bank digital currencies are worth the equivalent of a nation’s paper money. Therefore, they are subject to the same guarantees from the governments that issue them.
In recent days, the president of the US Federal Reserve raised the possibility that the nation could accelerate the issuance of a digital dollar. Powell believes that congressional approval will be necessary to develop a CBDC. However, he said that “that is not clear until we see in which direction we are going.” However, he is convinced that 2021 will be a relevant year for the advancement of this project.
By Willmen Blanco