Remember when Congress got all hot and bothered about Stablecoins at the end of last year? This was Liz Warren “the most dangerous part of the crypto world. It’s where the scammers and the cheats and the swindlers mix among part-time investors and first-time crypto traders. In DeFi, someone can’t even tell if they’re dealing with a terrorist.” Read between the lines though and there’s a clear message: the US is terrified of being left behind in financial innovation. The thing is, while DeFi is being painted as the big bad here, it might just be that it’s simply an excuse to accelerate the urgency to act in the face of a completely different perceived threat. CBDCs or central bank currencies. Not a threat in themselves, in fact, you’d be forgiven for thinking that a CBDC is actually exactly what the US government wants – but even that isn’t straightforward. No, the threat actually comes from a much more familiar place.
The Winter Olympics are due to commence in two weeks on the 2nd of February in Beijing. You might be forgiven for thinking that this is a sporting event but it will actually present a golden opportunity for China to showcase their centrally-backed digital currency, the e-CNY with a plan to make it the only digital payment option at the event alongside cash and Visa cards – so no Alipay or WeChat Pay (at least not just yet). You might have thought these strange new digital currencies were a long way from hitting the mainstream but they’re not. They’re already here. So if you’re looking to get your ABC’s on CBDCs then this is the place to be. What are they, where are they being created and what benefits and risks do they pose to DeFi?