When we talk about cryptocurrencies today, many think of bitcoin or some altcoins. Central banks plan important changes to our money, by “CBDC” which are a regulatory reaction to the 2008 recession and an acknowledgment of the benefits of having a digital alternative to fiat money. They may not be exactly the same but the effects on both will be significant.

According to the Bank for International Settlements (BIS) in January of 2020, before there was even a mention of the coming economic upheaval, 80% of central banks were researching the idea of digital currencies. As far back as August 2019, Mark Carney, then Bank of England governor, stated that “should an increase in the share of trade being invoiced in digital currencies increase, shocks from the US would have a less potent spillover to other countries”.

While the introduction of Bitcoin sought, among other issues, to address the question of decentralization, a central bank doesn’t necessarily have this need. In effect, a CBDC will enable central banks to directly connect with the individual’s bank account when it needs to, bypassing middlemen and getting money into the system quickly.

The direct effects will include the government’s complete control of and visibility over earnings, spending habits, and tax liabilities. In the absence of paper money, the black economy may simply disappear. It’s only natural to assume that decentralized currencies such as Bitcoin will be used by many multiples of the current user base in such a scenario.

Helicopter money

It is a well-known axiom that governments (central banks) are continuously fighting the last war and its unlikely plans will have progressed far enough to address the current crisis. That doesn’t mean, however, that the adoption of CBDCs will slow down once the current crisis subsides.

The requirement to get money to individuals and small businesses was an immediate reaction to global shutdowns but the inability to do so was starkly exposed when these programs were initiated. The small portion of earmarked funds actually reaching SMEs are an obvious example.

Central banks now understand that to be effective in countering modern systemic shocks they simply have to adopt some form of digital money.

Slow is smooth. Smooth is fast

Those expecting a fast and complete introduction of CBDCs will be disappointed, as central banks are continuing with their research and stress testing. Among the normal economic theoretical issues to be considered are the additional real-world issues thrown up during the short time of existing digital currencies.

Inflation concerns, a reluctance by people to adopt a purely digital economy, the effect on the existing banking sector and its business model are just some of the concerns that are under scrutiny. As with the adoption of the euro, who can say that we don’t fainally arrive at one global currency?

One of the effects will be that cryptos will no longer be an alternative investment. Using the great power of persuasion of national governments, the adoption of digital currencies by normal individuals will be immediate. In such an event, cryptocurrency’s exposure today will seem like a small grey spot on the moon, rather than tomorrow when it becomes the moon itself.

PayPal’s experience, a recent convert to cryptocurrency, will be closely watched by central banks for how clients interact with a digital option. Their CEO, Dan Schulman, commenting in a recent CNBC interview, observed that “people are flocking to digital payments and digital forms of currency” but risks still remain.


The actual mechanics of implementation will also be extremely important. Many central banks have admitted to using the BTC growth model as a basis in their studies trying to determine how digital currencies may grow and how best to counter people’s concerns.

Rob Frye, the American CEO of Malta-based cryptocurrency platform, Xcoins, has said how their focus on 24/7 live customer support has had as much impact on their business growth as the general public’s increased interest in cryptos.

“There’s not much point developing something if people simply don’t understand or aren’t comfortable using it. Suffice it to say that CBDCs will have to be accompanied by massive user information campaigns and support infrastructure underpinning any launch,” he said when recently interviewed on the subject.”

‘Bitcoin’ for the masses

This is no longer an ‘if’ but rather a ‘when’ proposition. It only took six years for adoption of the euro with most analysts expecting accelerating CBDC adoption to have a game-changing impact on our lives very soon.