Analysis of “CBDC digital baht”, what are its advantages and limitations?

recently Many people may have seen the news about the progress of CBDC or digital baht which has already been opened for trial with some stores in Thailand It is exciting to see the progress in financial technology taking place in our country. This is not just in Thailand, but many countries have already developed their own CBDCs, such as China, which is trialling the use of the digital yuan with public transportation systems in some provinces. Therefore, there is a high possibility that CBDC will play a role in our daily life in the near future.

In this article, I will tell you what CBDC is and summarize the advantages and limitations of CBDC if we are to actually use it.

What is a CBDC?

Starting with CBDC, an abbreviation for Central Bank Digital Currency, it means a digital currency issued by a central bank. But it is built on the basis of blockchain technology. Therefore, it is transparent, verifiable, and increases the convenience and speed of transactions in the digital age. And because they are issued by a central bank, CBDCs can be used as a medium to pay for goods and services. has a fixed value and can be used to pay debts legally

Unlock the true potential of CBDC

1. Increase access to financial services: People who do not have access to financial services Also known as the Unbanked group, which may be due to their residence not allowing banks to open branches. CBDC will be a bridge connecting traditional financial services, whether it be savings, borrowing, insurance, etc., to be accessible to a group of people. These are to improve their lives and stimulate the economy at the same time.
2. Increase the efficiency of cross-border money transfers : Using blockchain technology and smart contracts, CBDCs can enhance cross-border transactions. Whether it is increasing speed Increases security, reduces costs, and can also help eliminate intermediaries and chaotic steps from cross-border transactions. This will help increase the efficiency of international trade and finance. Including stimulating economic growth at the global level. If countries use CBDCs that are interoperable
3. More accurate monetary policy : Using a CBDC could help central banks more easily control monetary policy. This is because banks will be able to transparently monitor money movements and when used in conjunction with economic data. The central bank or government sector will be able to issue policies that are more suitable to the economic conditions more easily. Whether it is increasing interest rates, reserves, or precise economic stimulus policies. This will support the economy to be stable and grow in the long run.

CBDC and challenges to overcome

1. Privacy issues : The first of many challenges One concern when talking about CBDC is privacy. CBDC is built on the basis of blockchain technology that can verify various information. Can be transparent Some people are therefore concerned that they may be monitored by government agencies. This problem may be solved through discussions between many parties, such as citizens, lawmakers, entrepreneurs, banks, developers, and the government, to jointly find ways to use CBDCs that can preserve both privacy and trust. Perfect
2. technology problems : For a CBDC to be successful, the underlying technology is also crucial, as widespread use of a CBDC will almost certainly generate a huge number of transactions. Basic technology that can support a large number of transactions without the system crashing is therefore very important. Otherwise, it could bring the entire financial system to a halt.

But at the same time Such technology must also have a security system that can withstand attacks by criminals. To find the basic technology that can support CBDC on a large scale In addition to requiring a large investment This may require collaboration between technology experts, businesses, banks and government.

3. Risks to the traditional financial system : Although CBDC comes with many benefits But putting it into practice can come with some risks as well. One of them is Some users may choose to hold their CBDC directly with the central bank. As a result, the role of commercial banks has been reduced. The consequences are The deposit base of commercial banks has decreased. and cannot provide certain financial services And there may be a continuing impact on interest rate policy as well. Therefore, the central bank is considering various risks. carefully before putting CBDC into practice
4. Working with foreign countries : Today, many countries are continuously developing their own CBDCs. But that raises another worrisome issue: collaboration. Because it is still unclear whether each country's CBDC will be able to work together seamlessly or not. Both in terms of technology and regulations This is another challenge that international organizations face. Whether it's economics, politics or technology, it's good. It must help push for the CBDC of each country to be able to work together smoothly. Otherwise, there may be inequality or loss of trade opportunities with some countries.

conclude

CBDC can reform the traditional financial system to make it more transparent. Able to reach a wider audience Increase the efficiency of international trade and support central banks in issuing more appropriate monetary policy. But CBDCs still have some challenges that require cooperation from many parties. department in order to be able to bring out its full potential The challenges include Privacy issues Basic technology Impact on the traditional financial system and international collaboration

refer Bitkub Blog

Warning

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