The Banking Executive Magazine - May 2022 Issue

Cryptocurrencies and Blockchain Technology transact in digital Yuan. As the PBOC has made clear, a digital Yuan would be linked one-to-one with cash and could provide obvious efficiencies relative to cash and be useful in re- gions where financial services are scarce. The PBOC is also exploring regula- tions to prevent a central bank digital currency from triggering financial in- stitution disintermediation, or bank runs, should citizens quickly transfer funds into e-CNY accounts in times of stress. E-CNY would, in principle, employ “managed anonymity” that is, anonymity for small value trans- actions and traceability for high value transactions. The Federal Reserve (Fed) is also in- vestigating the launch of a digital U.S. dollar. This is in part an effort to provide digital central bank money as a superior alternative to private sector stablecoin and Cryptocurren- cies. Some Fed officials have ex- pressed skepticism about whether a digital USD would increase eco- nomic access for the unbanked as well it is necessary to combat all risks that stablecoin could pose to finan- cial stability. However, a digital USD might be compulsory to maintain a strong dollar over international com- petition; this fact could speed up the development of a digital currency. CONCLUSION Finally, Cryptocurrencies are having significant difficulties and unlikely to be used as mediums of exchange, and we take a cautious view of their role in portfolios beyond that of a call option on their underlying tech- nology. Despite the limitations of Cryptocurrencies, Central bank digi- tal currencies could become one day a part of the financial market land- scape and see this digital transition achievable without financial disrup- tion. But while some central bank digital currencies may incorporate elements of Blockchain technology, the resulting landscape is likely to be something short of the idealized, au- thority-free, and decentralized finan- cial systems. At this point, Cryptocurrency is risky and highly volatile, and they are still evolving; meanwhile investors have become well aware and interested about Cryptocurrencies so they can diversify more their financial portfo- lios, increase their wealth and use it as hedge feature in case of high in- flation or unexpected economic con- ditions,. Finally, recent regulation also suggested that Cryptocurrencies is still at its first stage and they could face significant uncertainties. the BANKING EXECUTIVE 42 ISSUE 161 MAY 2022