Digital Currencies Could Become a New Form of Transaction in Society

Digital Currencies Could Become a New Form of Transaction in Society

The argument for a cashless society has been a hot one for years now with some people not in favour of digital currencies while others think it could be the best thing yet to happen. Regardless of the divided stance, however,  digital currencies in the form of cryptocurrencies such as bitcoin, ethereum, etc have proven their utility in the current economy and this has also led to the growth of crypto wallets such as Yellow Card.

The coronavirus pandemic has been registered as a plausible catalyst for the global rise of digital currencies over the past year. And even in Uganda, at a time when the pandemic was at its peak and people preferred cash-less options of payment to cash, bitcoin, the world’s foremost cryptocurrency had stepped up to offer a safe, convenient and cheap option to many.

With Yellow Card’s multiple payment options that don’t involve the holding of cash, the rise in the use of digital currency especially Bitcoin in Uganda has been noticed throughout this season.

With 80% of central banks worldwide exploring the use of Central Bank Digital Currencies (CBDCs), it is only a matter of time before digital currencies become the first choice when transacting.

What is a CBDC?

A CBDC is a state-backed digital or electronic form of central bank money. A CBDC could be used as a means of payment, a unit of account and storage of value.

Since time immemorial, societies have always relied on trade to grow – initially by exchanging goods by using gold, silver or copper, sometimes even paying by salt, until pennies and paper came into circulation, with the earliest forms of currencies and money coming into use along with the establishment of central banks. Very recently, new mediums of exchange including the world’s foremost decentralised cryptocurrency bitcoin and other digital currencies have emerged.

Band 1 Fintech Law Expert Dr Ian Gauci argues that as important as having money it became equally important to have means by which money could be transferred instantly and in real-time. Swift electronic payment became crucial. In recent years, the majority of central banks, both at the national and supranational level, started toying with the idea of introducing a new type of currency, issued in digital form rather than paper form and on ledger technology such as blockchain. Known as central bank digital currency or CBDC, such digital currency would effectively have the status of legal tender, only it would be issued purely on a ledger technology and no ‘paper’ representation of such CBDC would exist.

With many arguments on whether Digital currencies will only be used between financial institutions or among individuals which would mean opening an account with the central bank linger on, bitcoins are not waiting for anyone as their value grows on a daily basis.

Adoption of digital assets, cryptocurrencies, as well as CBDC if integrated intelligently will certainly fuel the digital economy creating a new standard of exchange. The uptake however needs to be based on trust and any trade-offs would need to be well assessed, essential, non-discriminatory, transparent and proportionate for a cashless society to be the lynchpin of the future digital economy.

A number of the central banks that have progressed to development or a pilot project are based in emerging market economies. One of the most advanced is The People’s Bank of China, the central bank of China, which began testing its digital currency in selected cities and plans to launch it nationwide though a firm date has yet to be set.

The COVID-19 pandemic presented challenges to central banks as they sought to support monetary policy, particularly the disbursement of payments to citizens. The Bank For International Settlements (BIS) observed that the pandemic has acted as a catalyst to the further development of CBDCs, particularly in the retail payments sector.

Motivations to develop CBDCs include improvement of domestic payments efficiency, payments safety and diversity, and financial stability (particularly important in emerging markets). In more advanced economies, central banks see CBDCs as a route to increased cross-border payments efficiency. There are also expected benefits in transparency, which will help fight financial crime as CBDCs will be easier to trace than physical money. Policy consideration of a direct (full retail) CBDC should take into account the possible concentration of risk, disintermediation of financial institutions and excessive government control of credit allocation.

Central banks in the Caribbean are also exploring digital currencies to improve financial inclusion and explore the benefits including lower cost of cash and know your customer controls 6. Indeed, the first nationwide CBDC in the world has been launched by The Central Bank of The Bahamas after a successful 2019 pilot.

Enter digital wallets like Yellow Card

Because of such developments and more, it is very much important for governments to turn to wallets that can safely secure digital currencies making them available for fast, secure, and borderless trade in real-time. This in time puts the Yellow Card Wallet as the wallet of choice because of the security measures they encompass and looking at how easy they are to use.

Yellow Card offers the safest, fastest and easiest way for anyone to buy, sell and store bitcoin in Uganda with its mobile apps for android and iOS devices as well as a web app that can be accessed on any device. In addition, the company values financial literacy and is thus dedicated to educating the public on the significance of bitcoin as well as the technological growth and innovation that stems from it. This way, Uganda can join other African countries increasing cryptocurrency adoption around the continent.

source: https://techjaja.com/digital-currencies-could-become-a-new-form-of-transaction-in-society/

Kenneth Page

A futurist and entrepreneur working on the next generation of financial services. He studied reports on blockchain technology companies building the infrastructure, applications, and practices that enable a decentralized world.

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