Question

What do you know about bitcoin? What do you know about the negative effects of bitcoin? Why are so many central bankers opposed to bitcoin or highly skeptical of it? Given all the negative effects of bitcoin, why are many central bankers contemplating the release of their own digital currency? What are the possible benefits? Why is the People’s Bank of China soon expected to launch a digital version of China’s national currency, the yuan? What are the possible risks of national digital currencies? How great do you consider these risks to be?

Answer 1

What is Bitcoin ?

BItcoin is an electronic cash form, a cryptocurrency. It is a distributed digital currency that can be sent from user to consumer on the peer-to-peer blockchain network without the need for intermediaries without a central bank or single administrator. It is powered by the technology of blockchain.

Some of the negatives of Bitcoins -

Exposure to Bitcoin-Specific Scams and Fraud

Black Market Activity May Damage Reputation and Usefulness

Susceptible to High Price Volatility

No Chargebacks or Refunds

Potential to Be Replaced by Superior Cryptocurrency

Environmental Ills of Bitcoin Mining

Hacking is a serious risk because your lost or stolen bitcoins can not be returned. Some studies suggest that a lot of investors were reducing their currency and mining loss savings. Exchanges are more prone to compromise — even if a smart wallet is secured.

Why are so many central bankers opposed to bitcoin or highly skeptical of it?

Big banks like Bitcoin to be killed before they are ruined.

The "people's money" Bitcoin has the ability to become a new currency, independent from the influence of big governments and big banks.

That's why they both want this ability to be minimal. Each in its own way. Big governments have stepped up Initial Coin Offerings (ICOs) controls and shut down cryptocurrency exchanges, as recently announced by the Chinese government, smashing cryptocurrencies.

To be fair, bankers are not the only ones to raise their level of skepticism about Bitcoin's rapid rise and other digital currencies. Yet I suppose it's more than cynicism to term the digital currency a hoax and a tulip. It undermines Bitcoin's potential to become a "peoples ' currency" and substitutes for national currencies.

why are many central bankers contemplating the release of their own digital currency?

Unable to control the growth and influence of such cryptocurrencies, many of the world's leading central banks are working on or planning to launch their own cryptocurrencies versions. These regulated cryptocurrencies are called digital currencies of the central bank and will be operated by a particular country's respective monetary or central banks. Also known as digital fiat currencies or digital base money, CBDC will act as a digital representation of the fiat currency of a country and be supported by an appropriate amount of monetary reserves such as gold or forex.

Each CBDC unit will act as a secure digital tool equivalent to a paper bill, and can be used as a payment method, value store, and account unit. Like a paper-based currency note with a unique serial number, to prevent imitation, each CBDC unit will also be distinguishable. Since it will be a part of the central bank-controlled money supply, it will work alongside other limited money sources such as coins, bills, notes and securities. CBDC aims to bring the best of both worlds –the convenience and security of electronic media such as cryptocurrency, and the limited, controlled cash flow of the traditional banking system.The country's specific central bank or other competent monetary authority will be solely responsible for its operations.

Why is the People’s Bank of China soon expected to launch a digital version of China’s national currency, the yuan?

The People's Bank of China is about to become the first major central bank to issue a digital version of its currency, the yuan, seeking to keep up with a rapidly digitizing economy— and control over it. However, contrary to cryptocurrencies such as Bitcoin, dealing in the digital yuan will have no presumption of total anonymity, and its value will be as stable as the physical yuan, which will also stick around. There are still some questions, including the impact on commercial banks as well as big tech companies like Ant Financial and Tencent Holdings Ltd. that already offer payment services. There is a need to handle technological change on its own terms behind the rush of China.

Not all the specifics are out, but it could operate something like this according to recent patents issued by the PBOC and official speeches: consumers and businesses will access a digital wallet on their mobile phone and transfer the digital cash from their account to a commercial bank— equivalent to heading to an ATM. They then make and receive payments like cash with anyone else who also has a digital wallet.

What are the possible risks of national digital currencies? How great do you consider these risks to be?

Digital currencies have captured everyone's interest from government regulators and major corporations to organized crime syndicates and rogue states, introducing fraud and political threats. Here are some of the risks of digital currencies

DARK MARKETS

MONEY-LAUNDERING

ILLICIT GOODS

PYRAMID SCHEMES

STATE-BACKED EFFORTS

HEDGING

SANCTIONS EVASION

FUNDRAISING

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