BCGAME - Free 5BTC Daily Bonus!Govcoins, also known as CBDCs (central bank digital currencies), are digital currencies issued and supported by federal government central banks. They are expected to be the most revolutionary innovation in finance since the invention of ATM, although their development goes unnoticed by the general population.
What are Govcoins?
Government-issued digital currencies are pegged to established currencies such as the euro or the Chinese yuan. The term Govcoin is not a label for a particular currency, but rather a collective term for the concept of many different national and regional digital currencies. Govcoins are being developed to facilitate a faster, cheaper and more secure payment system. In some ways, Govcoins are similar to popular decentralized cryptocurrencies such as Bitcoin (BTC) or Ethereum (ETH). However, unlike cryptocurrencies based on decentralization, Govcoins are centralized and regulated by the state.
What are the benefits of Govcoins?
Furthermore, Govcoins are not as volatile as most cryptocurrencies and therefore pose little risk. One of the reasons governments and central banks have created their own digital currencies is that many are challenged by the rapid decline of money and the growing adoption of decentralized cryptocurrencies. In particular, governments are concerned about the entry of long-standing companies into cryptospace, such as Visa, Mastercard or Facebook. Among other concerns, anonymous transaction methods can facilitate illegal activities and undermine the financial system.
What do Govcoins do?
Govcoins embrace technology blockchain first introduced by Bitcoin (BTC) and use it for governance purposes and to cut the global banking system's operating costs, which amount to about $350 per account per year. Through this new payment method, the government can regain some control by monitoring all payments and even the entire transaction history of individuals. This would transfer power back to the state and central banks, which currently have the primary task of providing funds to commercial banks, with transactions happening privately through these banks. A person's money would be guaranteed directly by the state, not by a bank that could collapse. The new system can also be used to mitigate financial crimes such as tax evasion and money laundering.
Central banks argue that by reducing global banking costs, Govcoins would create a more inclusive banking system than most countries currently operate. This would give 1,7 billion people currently without a bank account around the world equal access to this type of transaction service. Unlike credit cards, Govcoins do not involve transaction fees and offer affordable loans and other financial advantages. Governments that ended up running out of money would not need to print or store more banknotes, which would reduce waste and help the environment. Furthermore, using only digital coins would also be more hygienic – a benefit that has gained greater attention during the current Covid-19 pandemic.
Govcoin users will be able to store their money in a digital wallet in the form of an app that looks like Apple Pay or PayPal. This way, users will no longer need bank accounts at commercial banks. All transactions go directly through the central bank, making the banking process simple and convenient, which also applies to international transactions. Eventually, Govcoins could also push for a universal currency. Residents of countries with a devaluing currency can choose a stable and valuable currency, such as the US dollar, instead of their native currency.
With the use of Govcoins, governments can also have the power to transform monetary policy. In contrast to current tools such as interest rates, electronic accounts would give central banks more precise control over systemic risks and the money supply – allowing them to “poke” economic behavior. In China's recent test, the e-yuan was programmed with an expiration date to encourage direct spending.
Which governments are looking for Govcoins?
A survey by the Bank for International Settlements, the so-called central bank of central banks, suggests that Govcoin projects are supported by nearly 90% of central banks, and that percentage is steadily growing.
China
Having cracked down heavily on cryptography in early 2021, China is the undisputed leader when it comes to implementing Govcoins. The country is the only major economy to have launched live tests, with more than 500.000 people receiving small amounts of e-yuan. Test takers need to download an app and present a QR code to use these digital funds at certain establishments. Among other reasons, China's ambition is politically induced, aimed at reducing the strength of the US dollar.
Bhamas, Cambodia and EU
While most central banks around the world have at least explored the idea of launching their own digital currencies, emerging markets are often more advanced in their research than developing markets and industrialized nations. The Bahamas (having launched the Sand Dollar in late 2019) and Cambodia (having launched the Bakong in 2020) are among the pioneering nations. However, neither the US nor the five largest European economies (Germany, France, Italy, Spain, and the UK) have made significant progress.
Among all European countries, Sweden has conducted the most research. The nation is planning to start using the eKrona widely as early as 2023. The European Union is planning to launch the e-Euro two years later. Other nations, such as El Salvador, Paraguay, and Panama, have gone the opposite way and widely accepted Bitcoin as a payment method.
What's the future for Govcoins?
As revolutionary as the idea may seem, the Govcoins have seen only very preliminary research in most developed nations. If all test phases are successful, it will take a long time before this new transaction method becomes a reality for most industrialized nations. Many are concerned that today's stable and most valuable currencies such as the US dollar, euro and pound sterling could lose value and power.
According to the Bank of England, even after implementing a Govcoin in the UK, CBDCs “would exist alongside cash and bank deposits, rather than replacing them”. At the same time, many other nations could run out of money completely.
What is the concern about Govcoins?
With the implementation of Govcoins, an immense amount of power over the financial system and citizens would be transferred back to the state, making finance more centralized than ever. Many experts also have significant concerns about data privacy, as each user's entire financial history would be known by the state. Suspicious accounts can be closed in an instant, which mitigates criminal behavior but also pushes personal boundaries.
A more centralized financial system
Commercial banks are concerned because, as mentioned above, Govcoins could pose a major threat to their existence. Many people might decide to use their central bank's cheaper and safer service rather than a commercial bank. With the reduction of bank deposits, the financial system would change significantly. For example, retail banks would have less access to finance to invest in mortgages and the economy. Eventually, banks could run out of financing, potentially leaving credit distribution to bureaucratic influence. At worst, bank runs could ensue, leading to the collapse of retail banks.
The Effect of Govcoins on Crypto Market
Another concern, especially among crypto investors, is the impact of Govcoins on the crypto market. On the one hand, this new digital payment method could lead many people to use low-risk, fast, and government-monitored digital currencies, which could hit the crypto market hard. On the other hand, concerns about data privacy and strong centralization could encourage a preference for decentralized cryptocurrencies. Whether the outcome for cryptocurrencies would be positive, negative, or neutral largely depends on government regulations, such as the recent cryptocurrency ban in China. In any case, the cryptocurrencies most vulnerable to widespread Govcoin implementation would be those that operate solely in the digital payment space, such as stablecoins including Tether ( USDT ) and XRP . Overall, the crypto market is unlikely to lose its overall value as an investment opportunity.
Conclusion
Govcoins are being designed to offer a fast, cheap and low risk trading service. Its introduction would also mean inclusion for countless people who currently do not have access to a bank account.
However, many government projects initiated to develop a national currency are not very advanced. Many developing countries, especially China, have made more progress in this direction than many supposedly sophisticated Western economies. This lack of progress raises concerns that today's more stable and valuable currencies such as the dollar and euro could lose value and power, shifting them to countries like China and the e-yuan.
In addition, many are concerned about data privacy and a disproportionate shift in power in favor of the state. These concerns could prompt governments to create and expand privacy laws to avoid distrust of central banks and prevent even more people from resorting to anonymous cryptocurrencies. In any case, digital coins will certainly develop to their full capacity. According to Professor Randall Kroszner of the University of Chicago Booth School of Business, “a digital currency revolution can go in two directions, whether it is a triumph of decentralization and market forces or a triumph of centralization and government monitoring” .
