A new study from financial services firm Deloitte highlighted the potential of Bitcoin (BTC) as a foundation to create 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 the looming problems of being “slow, error-prone and expensive compared to performance in other high-tech industries”.
However, the report pointed to five key areas where Bitcoin can help dramatically improve traditional fiat currency: speed, security, efficiency, cross-border payments, and collaboration with other payment participants:
“With the potential to […] do it without the day-to-day operational need for a centralized organization, be it commercial or federal, the result could be truly transformational.”
While mentioning the several differences between BTC and state-issued CBDCs, Deloitte’s analysis reiterates one of the key inflationary properties of fiat currencies, stating that CBDCs have no limit on the money supply in the ledger and that centralized governments increase the value of the Being able to determine CBDC .
According to the analysis, governments that are the first to roll out a nationwide CBDC will have an early bird advantage in influencing the use of their local currencies in international markets and transactions.
In a CBDC environment, Deloitte sees crypto exchanges maintaining their current position as a facilitator that will be used to “convert users’ cryptocurrencies into paper currencies when transacting in different currencies, and charge an exchange rate in return.” In such a scenario, banks will act as custodians of the distributed ledger who will compete with other miners to process transactions and collect the reward.
Finally, the analysis states that while CBDCs will not serve as a one-to-one replacement for BTC and other cryptocurrencies, the mainstreaming of CBDCs will open an additional option for users to choose the most convenient means of payment, concluding:
†[Bitcoin] could eventually lead to a series of new opportunities that […] transform the current payment system into one that is faster, safer and cheaper to use.”
Related: Jamaican central bank leaves Jam-Dex CBDC to early adopters
While many jurisdictions have joined the race to implement CBDCs in-house, widespread adoption is one of the key factors in its successful implementation.
In this effort, Jamaican Prime Minister Andrew Holness announced that the first 100,000 Jamaican citizens to use the country’s CBDC, Jam-Dex, will receive a free $16 payment in hopes of fostering widespread adoption.
Minister of Finance @NigelClarkeYes demonstrates the use of the CBDC to pay his hairdresser Paul during the #BudgetDebate2022† @CentralBankYES #JamDEx pic.twitter.com/izfRqX58Cy
— JLPJamaica (@jlpjamaica) March 8, 2022
As Cointelegraph reported, about 17% of the Jamaican population does not have a bank account, and with the launch of CBDC, the Jamaican government plans to encourage low- and middle-income citizens to join the national banking system.