Despite acknowledging that Central Bank Digital Currencies are also not stable, Edward Chancellor, a British financial historian, journalist, and investment strategist has said CBDCs are primed to lead to the destruction of Bitcoin.
He said this in an interview with Reuters, emphasizing that central bank digital currencies are highly risky projects.
— Reuters (@Reuters) May 13, 2021
This is amidst rising interest in the CBDC trend among countries’ central banks. China, Japan, the US, and the UK are some world powers already at one phase or the other of developing their digital currency.
He said that CBDCs might even kill Bitcoin. Chancellor explained that it is much easier to distribute and ”print” digital currencies rather than cash, and that will cause an utterly high level of inflation.
Chancellor said further during the interview that in order to solve the issue, the governments and central banks would have to fix the emission of their digital coins – which number would be much higher than 21 million Bitcoins.
He said changes in the form of money is a normal occurrence and have happened multiple times in the past. He noted that paper money replaced metal coins. He noted that the transition to digital currencies would invade the world, but he opined that Bitcoin would not be among one of them.
He concluded saying that CBDCs are cool but can not qualify as stable.
Why CBDCs are primed to fail
Researchers who have weighed into the CBDC topic, are saying that the digital currencies countries are preparing will fail.
According to these researchers, the entire business of creating a substitute for digital cash is at risk of failing because it lacks an “obvious justification.”
Peter Bofinger, writing for the European policy analysis publication VoxEU and Thomas Hass of the Economics department at University of Wuerzburg in Germany, argues that one reason these CBDCs are going to fail is that Central Banks are focusing on digital currencies as a medium of exchange.
Both writers state that CBDCs should rather be supranational digital currencies that act as a store of value in the international system instead of a mere medium of exchange.
According to Peter and Thomas, with the design Central Banks are coming up with for a digital currency, it will be difficult for central banks to launch a CBDC without interfering with the market.