A new study from financial services giant Deloitte highlighted the potential of Bitcoin (BTC) as a base 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 out the need for a complete redesign of the traditional fiat ecosystem to overcome impending issues of being “slow, error-prone and expensive relative to performance in other high-tech industries.”
However, the report pointed out five key areas where Bitcoin can help traditional fiat currency improve drastically — 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, whether commercial or federal, the result could truly be transformational.”
While stating the various difference between BTC and state-issued CBDCs, Deloitte’s analysis reiterates one of the major inflationary traits of fiat currency, stating that CBDCs have no cap on money supply contained on the ledger and that centralized governments can define the value of the CBDC.
According to the analysis, governments that are first to roll out a nationwide CBDC will have an early-bird advantage in influencing the use of their local currency in international markets and trades.
In a CBDC environment, Deloitte envisions crypto exchanges to retain their current position as a facilitator that will be used to convert “users’ cryptocurrency to paper currency when transacting across different currencies, and charges an exchange fee 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.
On an end note, 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 up an additional option for users to choose the most appropriate medium of payment, concluding:
“[Bitcoin] could ultimately spawn a series of new opportunities that would […] transform the current payments system into one that is faster, more secure, and less expensive to run.”
Related: Jamaican central bank to airdrop Jam-Dex CBDC to early adopters
While many jurisdictions have joined race to implement in-house CBDCs, one the key factors for its successful implementation is widespread adoption.
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 be given a free $16 payment in the hopes of promoting widespread adoption.
Finance Minister @NigelClarkeJa demonstrates use of the CBDC to pay his barber Paul during the #BudgetDebate2022. @CentralBankJA #JamDEx pic.twitter.com/izfRqX58Cy
— JLPJamaica (@jlpjamaica) March 8, 2022
As Cointelegraph reported, approximately 17% of the Jamaican population remains unbanked, and with the launch of CBDC, the Jamaican government plans to encourage low and middle-income citizens to join the national banking system.