Central bank digital currencies (CBDCs) are set to become more “smart,” according to the former head of the People’s Bank of China’s (PBoC) digital currency initiative. CBDCs could one day operate on blockchain networks like Ethereum, according to the former head of the PBoC’s digital currency initiative.
Yao Qian, currently head of the China Securities Regulatory Commission’s Science and Technology Supervision Bureau, CBDCs should not try to be merely a digital equivalent of real currency, but should also have smart contract capability.
Smart Contracts and CBDCs
Smart contracts are bits of blockchain code that execute automatically when specific criteria are satisfied, and they may be used to supplement or replace formal contracts.
However, Yao said at the International Finance Forum 2021 Spring Conference in Beijing that the frequency of security problems caused by smart contract flaws illustrates that the technology is still in its infancy. He also expressed worries about the legal legality of digital contracts.
As a result, central banks should proceed with caution, beginning with basic smart contracts and gradually increasing their complexity as security and legality improve.
Yao oversaw the PBoC’s digital currency research lab from its establishment until his departure in 2018, when he joined the China Securities Regulatory Commission. Many of the central bank’s patent filings pertaining to CBDC technology include him as an inventor or co-author.
What are CBDCs?
Central bank digital currency (CBDC) is a kind of money that is accepted only via electronic technology and does not need the usage of physical money or currency notes.
Bitcoins and other decentralized cryptocurrencies differ from centralized cryptocurrencies in that the network isn’t controlled by a single entity. The fundamental infrastructure, on the other hand, has remained unchanged.
Because the dollar is the world’s reserve currency, maintaining the project’s viability is more important than being the first to launch a digital version.
The Federal Reserve has yet to decide whether to create a digital currency. CBDC is a digital currency that is distributed by a central bank. It is also known as a digital dollar. Despite the fact that CBDCs may be interested, blockchain-based payment systems are not required.
A central bank, to create a new term, A national central bank, such as the Bank of England, develops and administers digital money. Instead of utilizing paper currency and coins, everything is done online.
How do you feel about Ethereum being used in CBDCs?