Highlights

  • Digital currencies are also commonly called CBDCs
  • Central bank digital currency also use blockchain like crypto but are managed by the central banks

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Digital Currency Vs. Cryptocurrency: The government to introduce “The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021" in the winter session of Parliament beginning November 29

As the government readies a Crypto Bill aimed at promoting a Digital Currency over the rampant crypto trade, EJ Biz looks at what is the big difference between the two digital tokens as we have see a faceoff between Digital Currency vs Crypto Currency

Also read| Crypto Bill: A look at how the world is regulating cryptocurrencies

The Issuer

  • Central bank digital currency or CBDCs are issued by governments and are regulated and backed by the central banks
  • Cryptocurrencies are developed by private parties independently from a central bank or government institution. Cryptos also make use of blockchain technology, a digital ledger system that records crypto transactions

Who has got your back?

  • The digital currency will be backed by the state and the central bank, which means in the event of a technical breakdown the regulator takes control
  • The digital currency is centralized; transactions are controlled by servers belonging to the central bank
  • Instead of being a tradeable asset with wildly fluctuating prices, central bank digital currencies would function more like their fiat counterparts, and would have widespread acceptance.
  • Cryptocurrencies are decentralized within the structure; the rules are dictated by the majority of participants in a crypto community and can face unregulated volatility.

Who is using Digital Currencies/CBDCs ?

  • The Chinese central bank is racing ahead with its own CBDC project, rolling out a virtual version of the yuan in trials across several provinces. People’s Bank of China is likely to be the first to fully launch a CBDC, the Mainland banned all crypto activity earlier this year.
  • In Japan, a consortium of roughly 70 Japanese firms, including the country's three mega-banks, will begin experiments to launch a digital currency as early as the latter half of 2022

Also Read | Cryptocurrency Bill: A ban in the works sends crypto prices crashing in India

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