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The executive director for CoinDesk, Emily Parker, has addressed the key differences between central bank digital currencies and private cryptocurrencies. Central bank digital currencies have been a heated topic globally, with countries fighting to dominate this innovation.
Bitcoin and CBDCs are different
During an interview with CNBC, Parker noted that many people in the crypto space failed to understand the differences between Bitcoin and CBDCs. Bitcoin and other private cryptocurrencies are independent, and they are not controlled by governments and their central banks, and none of these entities can shut down the Bitcoin network.
“Central bank digital currencies, like China’s, on the other hand, are literally issued by central banks, they are issued by governments,” Parker said. This makes them completely different from Bitcoin.
Around 90 countries around the world are issuing CBDCs. This is creating an even greater need for independent cryptocurrencies, as people who want to escape government control will prefer them.
However, while people could prefer private cryptocurrencies to CBDCs, there is also the concern of whether governments will sit back and watch the boom of cryptocurrencies that t6hey cannot control. Parker noted that while some people viewed CBDCs as the same as Bitcoin, they were not necessarily private as they could be easily tracked by governments.
Parker also pointed to the anonymity of cryptocurrencies such as Bitcoin, being a feature that concerns regulators. Cryptocurrencies have been used for money laundering and by cybercriminals, creating concern over their usage. However, she added that cryptocurrencies were less private than cash because each transaction can be traced on the blockchain.
Race for CBDC developments
China has been leading in the race towards launching CBDCs. The country has a digital yuan that is in the testing phase. The Chinese government had urged athletes going to the Winter Olympics to consider using the currency to test its cross-border capabilities. However, the US warned its athletes against using it due to privacy concerns.
The US has been hesitant to launch a digital dollar, with the Federal Reserve chair, Jerome Powell, saying that the country would take its time to ensure it gets everything right.
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