Private Crypto vs Public Digital - battle over currencies and payment platforms

The article discusses the ongoing competition between private cryptocurrencies and public digital currencies, particularly Central Bank Digital Currencies (CBDCs). For over a millennium, governments have issued fiat money, while banks have created private money through deposits and loans. In recent years, non-bank entities have introduced cryptocurrencies like Bitcoin and Ethereum, which have led to speculative behavior and illicit activities. As of 2024, cryptocurrencies represent only 0.5% of the global money supply. Governments are exploring CBDCs as alternatives, with China already implementing a digital yuan and other countries considering similar initiatives. CBDCs would be public and backed by central bank reserves, contrasting with the private nature of cryptocurrencies. The article highlights the challenges of adoption for new currencies, emphasizing the need for network effects to ensure their success. It also outlines the risks associated with cryptocurrencies, including volatility, lack of guarantees for anonymity, and potential for fraud. The legal status of cryptocurrencies varies globally, with ongoing regulatory debates in the U.S. and other countries. In contrast, CBDCs promise stability and security, potentially reducing speculation if managed properly. However, the article questions the necessity of CBDCs given the existing electronic payment systems and the high percentage of digital transactions already in use.

- The competition between private cryptocurrencies and public digital currencies is intensifying.

- Central Bank Digital Currencies (CBDCs) are being explored as stable alternatives to cryptocurrencies.

- Cryptocurrencies are associated with high volatility and illicit activities, while CBDCs offer government backing.

- The success of new digital currencies depends on solving the "chicken-or-egg" problem of user acceptance.

- Regulatory frameworks for cryptocurrencies are still evolving, leading to legal ambiguities.