CBDC Shockwaves: Crypto Exec’s Blunt Verdict on Insufficient Progress

• CBDCs are currently not feasible or capable of replacing cash
• Both central banks and private banks face challenges in issuing CBDCs
• CBDCs tied to a specific commercial bank may raise consumer trust issues

In a recent statement, Fadi Aboualfa, the research director at Copper, a London-based cryptocurrency custody company, criticized existing central bank digital currencies (CBDCs) and argued that the system is not yet feasible.

Are Central Bank Digital Currencies (CBDCs) Inadequate?

Aboualfa emphasized that any existing or under-development CBDC model in the market does not have the technical capacity to replace cash. He stated that if this were to be achieved, it would be a significant undertaking:

There is currently no CBDC model that can technically replace cash. They all have various flaws, and for a central bank to issue a CBDC would be a major endeavor for many reasons.

Aboualfa also pointed out the challenges faced by both central banks and private banks in issuing CBDCs. He mentioned that central banks lack the capability and infrastructure to issue CBDCs or operate a decentralized stablecoin. On the other hand, he highlighted the greater risks associated with private banks.

Using Silicon Valley Bank (SVB) as an example, Aboualfa stated that if the bank were to issue a CBDC, it would lose trust in the event of a financial crisis, and the asset would become de-pegged from the dollar.

Aboualfa strongly emphasized the potential consumer trust issues if CBDCs were tied to a specific commercial bank. He stated:

CBDCs issued by commercial banks could cause chaos in decentralized markets if scandalous news hits one of the banks.

Overall, Aboualfa’s analysis suggests that CBDCs are currently inadequate and face various challenges in terms of feasibility, technical capacity, and consumer trust. The development of a truly effective CBDC model remains a significant undertaking for central banks and private banks alike.