The Dhaka Times Desk Cryptocurrencies or digital currencies are becoming popular all over the world. This timely innovation is radically changing the way people think about financial transactions. So will the dominance of the dollar diminish?
It has caught the attention of major investors and corporate worlds all over the world. Currently, thousands of cryptocurrencies including Bitcoin, Ethereum, Ripple, Litecoin are roaming the virtual world. It also encourages illegal transactions including gambling, hundi, smuggling, cyber extortion, which has worried the policy makers of the world. So they are moving towards legitimate digital currencies to counter Bitcoin. Central banks are also conducting research on the use and impact of these currencies.
Digital currencies are those currencies that are traded only in the virtual world. Which in reality has no existence. All information exchanged is confidential, often anonymous. Such digital currencies are called cryptocurrencies. Bitcoin was launched in 2009 as the world's first digital currency. However, although cryptocurrency has an online value, no government or central bank controls it.
There is also a difference between digital currency and the online transactions of current conventional currencies. For example, online purchases in America are currently billed in dollars, but in the case of digital currency, digital currency is sent to the seller using a mobile device rather than dollars. It's no different than the payment apps people use to make payments today, like Venmo, PayPal, or Apple Pay. Electronic forms of currency have already become dominant in the financial systems of many countries around the world. For example, in the United States, the world's largest economy, external use of the dollar is only one-tenth of the total money supply. Rest of the transactions are also online. So central banks are currently researching their own currency creation and its implications. The digital currency is called Central Bank Digital Currency or CBDC.
A Central Bank Digital Currency (CBDC) is a currency system that will be authorized and overseen by central banks. According to Forbes magazine, 80 percent of the world's central banks are researching this technology. Among which USA, China, Russia, Japan have advanced far. The United States' central bank, the Federal Reserve, and MIT are jointly researching CBDC through the Hamilton Project. The aim of this project is to determine how digital currency will work and what kind of system needs to be developed in this regard.
Central banks of 9 countries have already approved digital currency issuance. 14 countries including China, Saudi Arabia, United Arab Emirates, South Korea have started managing this digital currency experimentally. Of which China has completed the pilot project and prepared everything. However, they have not yet issued a digital currency. At least 16 countries are in the pilot phase. These are - India, Türkiye, Canada, Brazil, Thailand etc. Another 40 countries have already announced they are in the research stage on the issue.
According to a study on digital currencies, the Caribbean islands of the Bahamas and Nigeria have already introduced digital currencies. Some countries, such as the United States and Japan, do not recognize cryptocurrencies as currencies, but do treat them as assets. Sweden has completed but not launched pilot projects in this regard. Canada has decided not to start the pilot right now and said it will study the issue anew.
Analysts say the global spread of digital currencies will make international transactions easier. Even the dominance of the dollar will decline. This digital currency can be distributed between customers and merchants through banks. Users can also do this transaction through the digital wallet provided by the specific bank and through the digital currency stored in the mobile or device.
Analysts also said that the world of digital currencies could also weaken the value of the US dollar in the global reserve market. Then different countries will be able to directly exchange digital currency very easily, the dollar will not be needed as a common medium. Swift, the global financial messaging medium, would then be unnecessary. The dollar is used as a tool of US foreign policy. They can also easily ensure that countries that the United States has imposed sanctions on do not enter the dollar system. So far they could monitor international transactions through SWIFT. But if it is not needed now, the US will lose control. For that reason, they have to launch government digital currency.
Michael Sung, a digital currency researcher and professor at Shanghai Fudan University in China, told the Financial Times that people will also reduce their use of the dollar. The thing is, because all countries save reserves in dollars, the value of the dollar is very high. But if it is possible to pay bills directly, the use of dollars will also decrease. Then the developing countries will not have to think about the dollar-crisis to meet the import costs. It is assumed that the dominance of the United States will decrease. The US is still far behind in this digital currency race. There it is still in the research stage. The country's House Committee on Financial Services is already examining the feasibility of a government digital currency. Source: Ittefaq.
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