Not so long ago, news of China clamping down on anything crypto trading and mining dominated the airwaves, preceding a price dump. Expectedly, the price of Bitcoin rebounded after persuasions from investors who were confident in BTC’s prospects. However, questions still linger on the impact of central bank-backed digital currencies (CBDCs) on the crypto market as all know it.
Recently, Russia almost took the same route as China, with India also on the same page. In India, the government deliberately squeezed crypto investors by imposing more taxes to raise revenue to help prop up its COVID—battered economy.
While news of blanket bans seem to dominate in Asia, Europe and America seem upbeat. Regardless, tighter rules are cooking everywhere to weed out a rampant rise in fraud cases relating to the crypto industry and are impacting bitcoin cash price prediction in PrimeXBT and other trading platforms.
What Is A CBDC and How Does It Differ From Other Coins?
The Indian Rupee, backed by the Central Bank of India, will be, with the blessing of the government, be the first CBDC in the country.
Traditionally, cryptocurrencies relied on their distributed base to advance their value proposition of serving use cases in a censorship resistant environment. Stablecoins, on the other hand, are pegged to fiat currencies like the greenback, or sometimes precious metals such as gold. These currencies and commodities are a permanent fixture in the traditional market, and are useful. However, the stablecoin arrangement, regardless of what they bring on the table, has been met with doubt.
Bitcoin and Ethereum work differently from stablecoins, they exist solely on their acceptance by the society as enablers of trustless and borderless movement of value, for instance, subsequently helping them dominate PrimeXBT and other trading platforms. The icing on the cake is the absence of mediators and the secure blockchain technology that they ride on.
Intriguingly, some crypto coins rose to prominence because of the popularity of internet memes. Critically, widely accepted meme coins including Shiba Inu (SHIB) exist because of the premise that popular things have huge market potential — the same as how celebrities are assets to marketers all over social media. Regardless, meme coins and their increased risks are the fuel behind government-backed digital coins that are continuing to cook.
Central Bank Digital Currencies (CBDCs) Explained
At first look, CBDCs sound and look like cryptocurrencies, after all, they are digital coins like Bitcoin, and may also exist on a public chain. However, the distributed ledger technology that backs their expected existence makes them different from ordinary crypto.
Bitcoin, for example, uses peer-to-peer protocols that restrict access to other people over the same network. CBDCs will probably have copies of every transaction taking place, breaking the very law that backs crypto which stipulates that every transaction in the blockchain is the business of the sender and receiver and no one else in the same network.
While the structure of many CBDCs remains top secret, most governments trialing digital coins will likely back them on the already circulating, respective fiat currency. China, Sweden, Nigeria, and Japan have plans already drawn up while in most parts of the world they still maintain that fiat is the way to go, at least for now—research is ongoing to understand the viability of crypto coins in these countries.
Will Government Digital Coins Shake The Price Of Bitcoin?
As noted in the trading terminal of PrimeXBT, news of such magnitude has shaken bitcoin price in the past, alongside other crypto coins. Noteworthy, the announcement by China had a significant bearing on the crypto stock for a while before Bitcoin reached its highest ever value of over $69k in November 2021.
Conclusion
Countries drawing up plans for a digital currency remain a tiny minority for now, with their plans not having a significant impact yet on other nations to join. But it remains speculative to predict the price chart outlook of traditional crypto when big markets in North America and Europe flirt with the idea of a CBDCs and are investing heavily to have one operational.
