Digital currencies are the new money that emerged strongly in a few years. If you have considered investing your money in them, here you can learn about the role of digital currency. 

Digital currency is virtual money, meaning it does not physically exist.  It is possible to make payments or collections to a person in any part of the world. There is the benefit of making fast payments and avoiding additional transaction charges. In addition, the transfers are anonymous. 


One of its main characteristics is the opportunity of making transfers without an intermediary, such as banks or the State, so its control is decentralized.

Here, the difference between a digital currencies and a cryptocurrency lies if banks back it, and the other does not need an intermediary. 


Suppose the objective is to replace cash with a more efficient means of payment. In that case, a universal, anonymous, and non-interest-bearing CBDC should be established: universal like cash.

Unknown because it is an essential feature of cash that bears interest to emulate some money. Among other reasons, cash logistics are expensive, deteriorate over time, are dirty, transmit disease, and lead to crime (theft) and counterfeiting. Also a digital variant would be more efficient, cleaner, and more secure. 


Evaluating the advantages and disadvantages of these variants is not easy. As a general rule, the most radical modalities are, in principle, more advantageous and risky. And the uncertainty of this evaluation also increases with the claims of the proposals. 

The current RTGS infrastructure

The current RTGS infrastructure provided by central banks is secure and reliable but expensive from the point of view of collateral consumption. A DLT-based alternative could reduce the need for collateral. On the other hand, the role of central banks as guarantors of transactions would be decentralized, with possible efficiency gains. And it would probably be opened up to a more significant number of participants, in addition to banks, which would increase competition and reduce costs. 

The critical question is whether an independent central bank, tasked with maintaining price stability, would have the legitimacy to impose policy.

Central banks are vulnerable to criticism of democratic legitimacy, and the more functions they accumulate.

Accountability is easier when you have a single objective (price stability) but much more difficult with several goals whose weighting is arbitrary. Having at your disposal a tool that can lead to the impoverishment of the entire population and that is on the border between the monetary and fiscal policy is probably incompatible with the independence of central banks. 


The central banks that are most seriously considering the issuance of CBDCs are facing a reduction in the use of cash and its possible elimination due to the use of alternative means of payment such as credit cards. 

 But while all this happens, you can continue acquiring foreign currency here. 


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