Over the course of 2020, countless countries around the world raced for their own digital versions of their currencies, known as central bank digital currencies or CBDCs. According to Jake Yocom-Piatt, co-founder of crypto project Decred, the crypto industry still has its selling points, even when most countries have launched CBDCs.
“I expect many nation states to create their own CBDCs in the not-so-distant future, but there is an important differentiator between CBDCs and cryptocurrencies,” Yocom-Piatt told Cointelegraph. “Cryptocurrencies, such as Bitcoin and Decred, are fundamentally fairer systems than fiat currencies, so while CBDCs can take over many cryptocurrency functions, they cannot compete on fairness.”
Last year, China led the way in terms of CBDC development pace, while the United States took a slower approach. Recent developments indicate one increased awareness of importance around CBDC development in the US CBDCs are likely to represent digital versions of countries’ dollars, although many details remain in flux at this stage.
As stated by Yocom-Piatt, crypto assets form different core frameworks depending on the asset and its composition. Bitcoin (BTC), for example, remains unbound to national currencies and borders, controlled by computer code and miners.
“Based on the fact that cryptocurrencies are arguably fairer with deterministic issuance schedules and self-held assets, I expect them to be relatively unaffected by CBDCs, which are only digital fiat,” said Yocom-Piatt.
Stablecoins, on the other hand, could logically feel more effect from a CBDC-run world, as their main purpose is to represent fiat in digital form, on the blockchain, tied to a specific value. However, the future of crypto-native stablecoins may still depend on the upcoming specifications of CBDCs.
“Depending on the actions you can take with your CBDC assets, it can cause stablecoins to become largely obsolete,” noted Decred’s co-founder. “If there are too many restrictions on CBDC assets, stablecoins can compete on flexibility.”
Stablecoins, such as USDT and USDC, function on the blockchain and allow for a large number of transactions and storage options. Especially USDC saw a remarkable amount of use within the decentralized financial sector or DeFi sector of crypto in 2020.