National Government Digital Currencies Versus Globally Distributed Cryptocurrencies: in Depth

Many governments are worried about the mass adoption of cryptocurrencies and hence are considering the merits of creating a central bank digital currency.

The mainstream media often wrongly refer to government backed digital currencies as cryptocurrencies without defining the new concept of central bank digital currency.

Cryptocurrencies were created with the intention to make central banks, the traditional bastions of monetary policy, redundant in the face of a peer-to-peer electronic cash.10 years after the publication of the Satoshi Nakamoto's Bitcoin whitepaper, cryptocurrencies are considered to be utilized by the very institutions they were meant to subvert.

Blockchain, the distributed ledger technology underpinning Bitcoin, is the tool that can be extended to a central bank digital currency.

Mounting calls for Switzerland to introduce a blockchain-based national cryptocurrency therefore continue to fall on deaf ears at the Swiss National Bank.

The Indonesian central bank doesn't deem digital currencies as legal tender.

Central Bank digital currencies or CBDC for short is meant to be an extension of existing central bank issued fiat money.

The Bank for International Settlements in a report out in March, Central bank digital currencies, stated that Central banks must carefully weigh the implications for financial stability and monetary policy of issuing digital currencies.

A national government digital currency would allow "Digital runs" to the central bank.

Money is the ultimate network effect and both cryptocurrencies as well as central bank digital currency can multiply these effects as well as diminishing the current acceptance of fiat money in the global financial system.