Financial Experts Raise Concerns as Central Banks are Testing CBDC Projects

Blockchain is the way of the future. Once a new technology has been introduced in the market, it is difficult to go back on the progression. Some Central banks, such as Europe, have issued reservations about the independent DeFi marketplace.

However, government officials have accepted the utility of blockchain technology and shared the aim to adopt it on a national scale for the digitization of fiat currencies. These projects are called CBDCs or Central Bank Digital Currencies.

There are several sovereign nations and Central Banks that are currently testing their individual CBDC projects. However, some financial experts have come forwards to share the negative implications that come with the publication of CBDCs.

One of the biggest concerns among these analysts is the loss of financial freedom and privacy. The CBDCs are deemed dangerous entities since they are fully centralized and under the control of the national government.

Some financial gurus, who understand the financial system, are raising their voices against CBDCs. They know very well that CBDCs are going to violate citizens’ financial privacy. A government-controlled CBDC will act more like a centralized entity rather than a decentralized system. It will affect the personal lives of people and sabotage their financial freedom.

Governments will have More Control Over Financial Systems via CBDCs

The objective of government enterprises is to have greater control over their native financial networks. A switch to CBDCs can help the government eliminate several issues, such as dependency on a third-party foreign currency.

At the same time, the government might be able to enforce monetary policies more swiftly and effectively than ever before. Furthermore, the cost of governance that is associated with maintaining and printing the fiat currency-based systems is going to reduce significantly.

However, with the CBDC projects in place, the people will have little room for independence and financial freedom. The government is likely to issue nationalized digital wallets where the users can store and exchange their CBDC-based reserves.

It means that there is a threat for everyone to get cut out or be restricted in case of any difference with the government enterprises. It comes with some systemic fallbacks that have highlighted the political blunders associated with the said project.

Atlantic Council’s Data Projection

Data projections from Atlantic Council have indicated that many countries around the world are either in the process of launching CBDCs or testing them. There is a fear among the developed nations of getting behind the curve in case they delay their local CBDC projects for too long.

Many nations are compelled to adopt the CBDC standard to counter the issue of counterfeited fiat currencies or make international payments cheaper and faster.

Agustin Carsten is the General Manager at the Bank of International Settlements or BIS. He claimed that CBDCs could increase global financial stability and offset the existing risk factors.

On the other hand, there are many concerns that CBDCs can impose greater control over individual and commercial financial transactions and trading choices.

The government may even introduce a sudden expiration date on the CBDCs which can become a big concern for the citizens. Catherine Fitts is a government official who agrees with the potential setbacks connected to CBDCs that the government should address.