According to Fadi Aboualfa, research manager at crypto brokerage firm Copper, current CBDC models are not equivalent to a decent amount of cash that people can use in day-to-day transactions.
Experts Say CBDCs Can't Replace Cash Yet
Central banks are exploring or experimenting with CBDC pilots; The Bank for International Settlements is developing a unified ledger system for global interoperability.
However, Aboualfa questions the viability of existing models. “Technically, there is no real CBDC model that can replace cash, they all have various flaws and it would be a colossal undertaking for a central bank to issue a CBDC for many reasons,” Aboualfa said.
The researcher explained that central bank digital currencies (CBDCs) can be issued in two different ways, either directly from a central bank or through commercial banks.
He said central banks do not have the capability or infrastructure to run a fully automated decentralized currency equivalent to cash.
In the case of CBDCs issued by brokerage banks, Aboualfa said consumer trust issues can arise if the tokens have a specific commercial bank branding.
“CBDCs issued by commercial banks could cause chaos in decentralized open markets should news of the scandal hit one of the banks,” he added.
Citing Silicon Valley Bank as an example, Aboualfa stated that if it had issued a CBDC, consumers would have lost confidence as soon as they were in distress, causing the token to lose parity with other dollar-pegged CBDCs.
*Not investment advice.
