Binance CEO Changpeng Zhao (CZ) expects that central bank digital currencies (CBDCs) will lack “a few key properties” of cryptocurrencies.

CZ made the statement in light of a question whether CBDCs would displace cryptocurrencies, once they are adopted. “I believe they’re going to coexist for a while,” was CZ’s initial response. He then highlighted that CBDCs lack “a few key properties” of cryptocurrencies that users value.

First, CZ mentioned that CBDCs will not be “permissionless.” Despite feasibly utilizing blockchain technology, the fact that central banks will be the issuers of CBDCs will likely preclude their being decentralized. 

Another aspect CZ said they will likely not have is a limited supply. To curb inflationary tendencies of traditional currencies, many cryptocurrencies have a cap on the amount that will eventually be produced. For instance, the total production cap for bitcoin (BTC) stands at 21 million. As CBDCs are destined to be another instrument of monetary policy, central banks will issue them as they see fit.

Again, as central bank instruments, CBDCs “are going to have quite a lot of surveillance and control attached to them,” CZ said. The ability to transact freely with whomever they wish has always been a key appealing feature for users of cryptocurrencies. CZ noted:

“So, even though they’re all mostly likely to use blockchain technology; they will have encryption, they will have private keys, public keys, blocks that form the chain.”

CBDCs’ missing “core properties that users care about,” will keep cryptocurrencies around even after they are issued.

Although CZ did not make this distinction in the interview, a recent study detailed different forms of CBDCs. Most discussions around CBDCs refer to what the study describes as wholesale CBDCs. Financial institutions, such as central banks, will primarily use them for interbank payments and financial settlement processes.

Countries with more developed interbank systems and capital markets are developing wholesale CBDCs. These include the UK and Japan.

These contrast with retail CBDCs, which are intended more as digital cash for commercial use by individuals and businesses. Countries issuing them are doing so more for reasons of financial inclusion than those listed above. Accordingly, the study highlights the development of retail CBDCs is more advanced in emerging economies. A pair of retail CBDCs have already gone live in the Bahamas and Cambodia.

The post CBDCs Will Lack ‘Key Properties’ of Cryptocurrencies, Says CZ appeared first on BeInCrypto.

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