Governments developing CBDCs could be a popular trend in 2021 as they try to combat corruption and money laundering using digital currencies. The CBDCs would be controlled by governments, making it easier for regulators to track funds’ movement. It will also empower the regulators to track down the actors behind any illicit activity.
The increase in CBDC establishment can be pinned to one major factor—the surge in Bitcoin’s value over the past year. Several governments globally still consider cryptocurrencies like Bitcoin as a tool for facilitating illegal activities. Hence, the development of CBDCs would help the government fight the cryptocurrency sector’s excesses.
Furthermore, the coronavirus pandemic laid bare the inadequacies of paper cash as the need for cashless transactions grew at an unprecedented rate last year. Governments and their central banks will develop CBDCs to enable the transition from paper cash to digital currencies.
Despite the positives of CBDCs in helping fight money laundering and other financial crimes, there are concerns about developing central bank-issued digital currencies. The CBDCs will enable governments to have more control over users and their financial activities. Many people believe that governments will use this power to increase financial discrimination. Others fear that anonymity and freedom will be at risk with the development of CBDCs.
The government will likely impose stricter know-your-customer (KYC) requirements for making a transfer, a move that could expose more user data to the mercy of financial and tech entities. Suppose tech giants like Apple and Google start processing payments for individuals. In that case, hackers will find it easier to harvest user data thanks to the electronic transaction history available from such platforms.
Read more: https://coinjournal.net/news/rise-of-cbdcs-could-boost-demand-for-privacy-coins-in-2021/