CBDC and Stablecoin: Competition in the Crypto Market

Recently, stablecoins like BUSD, USDC, and DAI have faced various challenges, leading many investors to consider CBDCs as a potential future replacement. However, while CBDCs offer opportunities, there are still concerns about privacy and security.

1. What is CBDC?

CBDC (Central Bank Digital Currency) is a digital currency issued and guaranteed by central banks. It is a government-regulated financial instrument that gives governments significant control over citizens' financial activities. However, the development of CBDCs also carries serious security risks, especially in countries that value personal freedoms.

2. Concerns About Privacy

CBDCs could raise issues about user privacy, as transactions may be closely monitored by governments. Experts like Christopher Giancarlo, former Chairman of the Commodity Futures Trading Commission (CFTC), recommend that CBDCs should be developed to protect personal privacy, rather than becoming tools for surveillance. These concerns stem from the potential for transactions to be tracked and users' data to be compromised.

3. Potential Technologies to Protect Privacy

To address privacy concerns, Giancarlo suggests technologies like "zero-knowledge proof" and homomorphic encryption. These technologies are expected to help create a CBDC system that does not expose users' personal information. However, these technologies are still in development and cannot yet fully guarantee security.

4. The Reality of CBDC in China

China has developed and tested the e-CNY (China’s CBDC), claiming to protect citizens' privacy. However, although e-CNY offers some anonymous features, the system still collects personal data, raising concerns about how user information is used. The Chinese government promises not to share data with third parties, but can it ensure safety amid rising cyberattacks?

5. CBDC Development and Its Impact on Crypto

CBDCs and stablecoins share many similarities, such as stable value storage and facilitating cross-border transactions. However, the strong development of CBDCs could impact the growth of decentralized cryptocurrencies (crypto). Governments are taking steps to limit the development of crypto to promote CBDCs.

6. Regulation and Government Actions

U.S. agencies like the Securities and Exchange Commission (SEC) are taking steps to limit the development of crypto assets, especially stablecoins, in favor of CBDC development. However, the lack of clear regulations regarding crypto has frustrated investors, as they feel their interests are not fully protected.

7. Challenges in CBDC Trials

While many countries are testing CBDCs, the results of these trials have not always met expectations. In China, despite incentives like a 20% discount for users, the adoption rate of e-CNY remains low. This indicates that transitioning from traditional fiat to digital currency is not an easy task.

8. The Future of CBDCs and Crypto

The development of CBDCs could change the global financial landscape. However, if governments decide to limit the growth of crypto to promote CBDCs, it could provoke resistance from users and investors. Maintaining a competitive balance between CBDCs and crypto will be key to building a fair and transparent financial ecosystem.

9. Conclusion

CBDCs have great potential but also face many challenges, particularly concerning privacy and government control. Developing a financial environment where both CBDCs and crypto can coexist is necessary to ensure the sustainable development of both. However, actions to restrict crypto may lead to resistance and complicate the deployment of CBDCs.