The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.

Digital currency has become a major trend in the current global economic development. Now more than 110 countries and regions in the world have carried out central bank digital currency-related work, including China. In fact, central bank digital currency is an electronic currency issued by the central bank. Both families and businesses can use this currency for payment and stored value. China's version of the central bank's digital currency is called the digital renminbi, which is issued by the People's Bank of China and will be operated by a designated operating agency and can be freely exchanged by the public. Many people who don’t understand the central bank’s digital currency want to know more about it, so let the editor of the currency circle briefly analyze the advantages and disadvantages of the issuance of the central bank’s digital currency.

 A brief analysis of the pros and cons of central bank digital currency issuance

1. Benefits of Central Bank Digital Currency

While most early adopters of Bitcoin, cypherpunks and true decentralization believers would be repulsed by the idea of national digital currencies run by centralized institutions, central banks around the world have been studying the benefits of issuing digital currencies.

·Stimulate economic growth

According to a study by the Bank of Canada (BOC), the introduction of a central bank digital currency “will increase consumption by 0.64% in Canada and 1.6% in the United States compared to using only cash.”

Backed by economic modeling, Bank of Canada economist Mohammad R.
Davoodalhosseini claims that the economies of the United States and Canada can be improved by introducing central bank digital currencies, as long as the implementation costs are not that high.

· More effective monetary policy

Davoodalhosseini also added that in an economy based on a central bank-issued digital currency, the central bank can manage monetary policy more effectively. Providing both cash and central bank digital currency to consumers will sometimes bring lower welfare to citizens than providing only cash or only central bank digital currency. If the motivation for introducing a central bank digital currency is to increase the effectiveness of monetary policy, then removing cash from circulation may be a welfare-enhancing policy.

·Easy to distribute and access

The Reserve Bank of New Zealand published a report titled "The Pros and Cons of Issuing a Central Bank Digital Currency," which concluded that digital currencies are easier to distribute and more secure than cash.

·Reduce transaction costs

The Reserve Bank of New Zealand's report writes that a blockchain-based sovereign digital currency may bring lower transaction costs and the possibility of better monetary policy management compared with existing digital payment methods.

·Reduce dependence on the U.S. dollar

For example, for countries that have to rely on the U.S. dollar due to their involvement in the oil trade, the introduction of a central bank-issued digital currency could help reduce dependence on the U.S. dollar, which in turn could mean more financial sovereignty for these countries.

·Avoiding sanctions

For countries that rely on the U.S. dollar but do not have friendly relations with the U.S. government, the introduction of a central bank-issued digital currency could help these countries circumvent sanctions. The President of Venezuela issued Petro for this purpose.

In addition, Iran has also established its own sovereign blockchain digital currency. Given the new sanctions imposed on the country by the United States, the introduction of such a CBDC would be beneficial to the country’s economy if it is implemented correctly and provides Iran with more financial sovereignty.

2. Defects of central bank digital currency

While the benefits of introducing a central bank digital currency are obvious for central banks and the country’s entire financial industry, it also has potential drawbacks.

·Implementation costs

New money running through innovative new technologies means that financial institutions, the public sector and even consumers must adopt this new technology.

Since the implementation of a sovereign digital currency will be carried out at the national level, taxpayers will have to bear the cost of implementing a CBDC.

·Blockchain scalability issues

Scalability challenges currently faced by most blockchain networks. Until today, no blockchain network has been able to handle Visa-level transaction volumes, and several major blockchain networks have driven up transaction fees due to their inability to handle large volumes of transactions.

·Potential loss of financial privacy for citizens

If the central bank issues digital currency on a private chain, it will not only be able to view each transaction in real time, but also associate different transactions, which will greatly reduce citizens' privacy.

The above article is a brief analysis of the pros and cons of the issuance of central bank digital currency. The editor of the currency circle here reminds investors that in fact, central banks of various countries have been very concerned about central bank digital currencies in the early days. Now, due to the rise of the Internet, people's consumption habits are very different, so a cashless society has also It has become a method favored by many people. With the development of blockchain technology, the digital economic model has become a hot topic in recent years. The current cash usage rate has been declining significantly. If this trend continues, the central bank's digital currency is likely to play a very important role in the future. role.