The debate is not new, the talk for or against a Central Bank approved digital currency (CBDC) has picked pace since Q2/2019. Nations across the world have been seriously reviewing the need to digitize their currency. China with its plans for a digital Yuan, has translated that talk into action – the Chinese digital currency is currently undergoing a trial phase. Developments since the COVID-19 pandemic set in, have drawn significant support for CBDCs.
Before The COVID-19 Pandemic
Before the COVID-19 pandemic, factors driving R&D for Central Bank Digital Currencies (CBDC) were in the technological and regulatory stages. Governments and bank leaders were studying pros and cons to ensure that right decisions were taken.
An official crypto currency could increase efficiency in the banking system. Money transfers would be done faster and by incurring lower costs. Countries like China realized that an official digital currency, could diminish the importance of the US$ in international trade.
Even governments that were generally against cryptocurrency, have often favored a CBDC. This because such a digital currency, would be regulated and directed by their central bank.
The rapid spread of COVID-19 infections, forced WHO (World Health Organization) to declare the crisis as a pandemic. It was presumed that, this would drive the issue of CBDCs to the backseat – there were apparently more pressing things to be taken care of.
During The Pandemic
As scientists and doctors battled a highly contagious and unknown virus, governments realized that locking down cities and entire nations, was the best way to handle the rapid spread of the coronavirus. This action would bring business and economies to a standstill but, there really was no other option.
What followed were a series of events, quite a few of these highlighted the importance of a digital currency, one controlled by the government – the case for a CBDC became increasingly clear.
As people lost their jobs or were forced to accept partial salaries, it became clear that financial assistance from the government was necessary. It did not take much to realize that, a digital currency would make the disbursement of government provided financial assistance, faster and more efficient.
The contagious nature of the coronavirus, made it necessary to minimize physical contact between people. The required norms of ‘social distancing’ suggested by medical experts, advised a distance of around 4 to 5 feet. It became known that the COVID-19 virus spread through droplets that were ejected when an infected person spoke or coughed. The objective was to stand away from the reach of these droplets.
Contactless payments fitted in with the requirement for social distancing. With most retail shops and malls shut, usage of online shopping portals increased – online payments became popular. The same concept of a CBDC, used to disburse financial assistance to citizens, could also be used to pay for online purchases.
A Central Bank Digital Currency, would provide the government and the central bank with an effective and low cost financial tool. Control would vest with the government and usage could be tracked and controlled.
While economists lavished praise on the miraculous benefits of globalization until last year, it is this very concept that that has today aggravated the pandemic scenario in many nations. Governments and people now seem eager to become self-sufficient, the concept of a local digital currency fits the mood.
Does Libra Fit In
It is no secret that the first version of Facebook’s brainchild, the Libra crypto was a major fiasco. Regulatory offices in many nations, unanimously struck down the plan. The Libra has recently morphed plans to become more ‘government friendly’. The essence of this plan is for the crypto to be linked to just one currency – the currency of the specific nation in which it is deployed. So what you would essentially have is multiple Libra’s – one for each country. Analysts ask if the modified Libra, would find favor with governments – acting as local Central Bank Digital Currencies that follow specific norms and policies formulated by the government. This does not seem likely to happen, the main reason being that, Facebook has not yet taken its ambition for a multiple currency Libra off the table.
Glitzkoin CEO Navneet Goenka mentions that, ‘ … the concept of de-globalization that has been put forward by many people, might not be very practical in the long run. Talking about CBDCs attached to the central bank in each nation, I would strongly support such a move. In an ideal scenario, CBDCs should play a role that goes beyond internal economics. Mincing no words here I would say that, governments should list their CBDC on reputed crypto exchanges. While this might lead to the global population, keeping just a handful of CBDCs in their wallets – it would also reflect the economic stability and strength of nations’.
GLITZKOIN: Glitzkoin is developed on the Stellar blockchain. The project includes the multifaceted GTN token that currently trades actively on 3 crypto exchanges (Cointiger, Stellarport and Dobitrade). Glitzkoin makes a direct connect to the multibillion dollar diamond industry. The project is promoted by second generation diamond veteran Navneet Goenka, it aims to improve productivity and market scope for the glittering industry. A comprehensive diamond trading platform (DiaEx) is part of the project, it supports both B2B and B2C trade in diamonds. As mentioned above GTN is traded by crypto traders on three exchanges, it is also designated as the mode of payment on DiaEx.