Ryan McMillin from Merkle Tree Capital speaks with Gabriel Carey from Cadre Capital about whether CBDC’s will kill crypto.
Transcript
Gabriel Carey:
Central bank digital currencies. There’s a fair bit of talk about that at the moment with China working on it, one in the US, and indeed in Australia, there’s conversation around a central bank digital currency. And the talk is that having a central bank digital currency will kill Bitcoin, and in fact, kill the entire crypto space. What are your thoughts on this?
Ryan McMillin:
Yeah, so only reserve banks seem to make this claim. Most recently, a governor of the reserve bank of India suggested soon to be introduced CBDCs will kill whatever use case there is for currencies like Bitcoin. I think it really highlights how little they understand cryptocurrencies CBDCS will be a type of stable coin, so very different to all other types of digital asset. They can improve payment efficiency and promote increased transparency via the use of distributed ledger technology. Central banks would be able to lower transaction cost and settlement time, particularly for cross border payments. This bolsters system integrity and lowers barriers to financial inclusion.
So CBDCs might represent a threat to stable coins, but it really depends on how they’re designed, particularly in respect to privacy. If they’re designed to be used as a surveillance tool or tied to a credit score, then they’ll most likely be pushed back and most users will prefer to use the existing suite of stable coins.
Bitcoin, for example, will only benefit from CBDCs being launched. I think this will bring more mainstream users into the digital asset ecosystem and they will quickly understand the benefits of Bitcoin there soon after, its limited supply, decentralization and public ledger. It’s also worth noting, the US central bank is leaning towards restricting CBDC use to institutional banks and leaving retail to continue using stable coins like USDS and USDT with a greater level of regulation. Philip Lowe, Governor of the RBA, recently suggested private enterprise may be better suited to innovating and creating stable coins.