Bitcoin well positioned to help governments create cheaper CBDCs: Deloitte

Deloitte’s new study highlighted the potential for Bitcoin (BTC), to be used as a foundation to create an easier, more secure and cheaper ecosystem for central bank digital currencies (CBDC) or electronic fiat currency (CBDC).

Deloitte’s State-Sponsored cryptocurrency analysis highlighted the need to completely redesign the traditional fiat system to address the impending problems of being “slow and error-prone” relative to other high-tech industries.

The report identified five areas in which Bitcoin could help traditional fiat currencies improve dramatically: speed, security and efficiency; cross-border payments and collaboration.

The result could be truly transformational if […] does it without the need for a central organization, federal or commercial.

There are similarities and differences between CBDCs, Bitcoin and Bitcoin. Source: Deloitte

Deloitte’s analysis identifies the differences between state-issued CBDCs and Bitcoin. However, it also explains one of the main inflationary characteristics of fiat currency: CBDCs don’t have a cap on money supply on the ledger. It is possible for central governments to determine the CBDC’s value.

The analysis shows that governments who are the first to implement a nationwide CBDC will be able to influence the use of their local currency on international markets and trades.

Deloitte sees crypto exchanges as continuing to be facilitators in a CBDC environment. They will be used to convert users’ cryptocurrency to paper currency, and will charge an exchange fee in return. In such a scenario banks will serve as custodians for the distributed ledger and compete with other miners to collect the reward.

The analysis concludes that, while CBDCs won’t replace BTC or other cryptocurrencies in a single way, their mainstreaming will allow users to choose the best medium of payment.

“[Bitcoin] could eventually spawn a series of new opportunities that transform current payments systems into one that is more efficient, safer, and cheaper to run.”

Related: Jamaican central banks to drop Jam-Dex CBDC for early adopters

Although many jurisdictions are now racing to implement CBDCs in their own homes, widespread adoption is the key factor for its success.

Andrew Holness, the Jamaican prime minister, announced that the first 100,000 Jamaican citizens who use Jam-Dex’s CBDC will receive a $16 payment. This is in the hope of encouraging widespread adoption.

@NigelClarkeJa, Finance Minister, shows how the CBDC was used to pay Paul his barber during the #BudgetDebate2022. @CentralBankJA #JamDEx
— JLPJamaica (@jlpjamaica) March 8, 2022

Cointelegraph reported that approximately 17% of Jamaica’s population is still unbanked. With the launch of CBDC the Jamaican government intends to encourage low- and middle-income residents to join the national bank system.