Digital Currency Revolution Series: Inference of BitMEX Research on CBDC

With sovereign governments and their central banks across the globe have been exploring the essence and the opportunities of CBDC (Central Bank Digital Currency) foreseeing a swift transformation phase in the prevailing finance system. 

BitMEX has come up with a research report that discusses the duality in governments’ approaches to the issuance of a Central Bank Digital Currency (CBDC) and the ramifications for the economy.

Here are the major ideas of Central Bank Digital Currency (CBDC) that have two distinctive approaches: 

1) Enabling retail clients to have deposits directly with the central bank, and, 2) Prohibition of liquid cash. It is inferred that both of them have quite unique economic characters, even though the two policies complement each other in some ways. The former would cause contraction in credit, and the latter helps in enhancing the credit expansion.

Recently, Bank of Japan (BoJ) executive Masayoshi Amamiya hints that the Japanese central bank is planningfor digital currency eyeing on mounting demand. Although Amamiya promotes BoJ’s CBDC plans that seems to be eventual requirement, BoJ is unlikely to develop a CBDC immediately, as per the reports of Reuters.

However, the advanced era of FinTech has come up with the new trends and inventions, such as, Smart contracts & DeFi which seem to be lucrative prospects. CBDC and Stable coins are also no exception but most likely to hit the financial avenue by endorsing luring use cases of digital experience that enables flexibility, controllability of the financial as well as real assets, efficient trade finance & loans business and offer interest-bearing contracts etc.

From the outlook of this research report, it seems that owing to the deflationary circumstance of allowing the public to hold electronic deposits at their central bank, it is reckoned that the financial regulators are unlikely to come up with the CBDC concepts to succeed in any meaningful way.