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Hi friends, welcome back to my blog. It feels good to have you back here. Of course we are going to continue from where we left off in our last topic. We would be going much deeper into our previous topic by exploring the pros and cons of CBDC.
Kindly tag along as I take you on this ride. Of course you would get so much value at the end of today's lesson...so sit back, relax and enjoy. Smiles.
|**Pros of CBDC**|
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• **Cost Reduction:** with the use of CBDC, users deal directly with central bank and not some intermediary like the commercial bank that charges extra for standing in between when trying to carry out a transaction in the traditional financial system.
• **Financial Inclusivity:** one of the major goal of CBDC is to create financial inclusion that aims to bring ease especially to users who cannot do without running financial transactions of all kind including digital payments. It hope to bring ease and efficiency to all manner of financial service especially the once that have always been a challenge in the traditional financial system.
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|[unsplash](https://unsplash.com/photos/black-iphone-5-on-yellow-textile-DoWZMPZ-M9s)|
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• **Faster and secured financial services**: Let's not forget that CBDC leveraged on the benefits provided by the Blockchain technology which includes speed and security. Hence user can also enjoy these benefits even with CBDCs although it not completely decentralized in nature just like cryptocurrency.
• **Direct Access to Central Bank fund**: Central Bank is actually in control of the CBDC and not commercial bank. Let's not forget that we mentioned in the last post that there are two types of CBDC based on users involved, the retail and the wholesale. The retail CBDC give consumers the privilege of direct access to fund in the central bank.
• **Easy Tracking of Fund**: CBDCs are powered by Blockchain and we all know that blockchain is designed in such a way that all transaction are recoded on a ledger permanently and can be traced via users address, it's even more easier for it to be traced here because the system is centralized. This then help to detect and track fraud and illicit activity like money laundering.
• **Reduces risk of losing fund**: Users or consumer fund will be safe with the central bank. They would enjoy more security than when their money is kept with commercial bank that is vulnerable to collapsing even under little pressure.
CBDC is totally controlled by Central Bank which is more stable and established by all commercial banks.
|**Cons of CBDC**|
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• **Lack of Privacy**: This is actually one of the downside to CBDC, since it's centralized, it therefore means your activity are not completely private, even before granted access to the use of CBDC, a lot of personal information would have been submitted and so they know you and can use the information supplied to track you any day any time without seeking any external means.
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|[unsplash](https://unsplash.com/photos/birds-eye-view-of-sitting-on-bench-while-discussion-wqLGlhjr6Og)|
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• **Government interference and control**: We shouldn't be surprised about this point.CBDC is the government idea, run and implemented through it agency, the central bank. They could use CBDC as a tool to check the activities of users by creating policies that restricts them from carrying out certain financial activities. For example, limiting the use of CBDCs for purchasing a specific kind of good and service
• **Centralization Risk**: Since the central bank is totally in charge of CBDCs, making it a centralized system, it makes the whole work easier for hackers especially when the central bank do not have a strong security system and fire walls to prevent attacks. Once a successful attack is launched, that brings the whole idea to an end.
It's unlike a decentralized system that make the whole hacking exercise cumbersome and overwhelming. An hacker would need to hack about 51% of the total network to gain control of it and manipulate it to his advantage.
• **Acceptance Issues**: it might take a very long time for CBDCs to be widely accepted as a currency that can be used for daily transaction by an average citizen especially when he or she is not a tech person. He would just be okay using the fiat currency that he feels is much more easier to access and use.
• **Threat to commercial Banks**: Commercial bank will be at the receiving end if CBDC becomes widely accepted. If retail CBDCs become common which grants consumers direct access to central banks for their financial need, commercial bank would loss many of their customer which would in the long run force most of the banks out of their banking operations.
|**Bottom Line**|
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I believe we now have a very good knowledge of what CBDC is coupled with it advantages and disadvantages. The inspiration behind it is from cryptocurrency but then there is a wide gap between the two currency which still make crypto stand out as the best.
There you go friends.I would love to wrap it up at this juncture. I want to believe you've gotten so much from this piece. As my usual custom is, I would always encourage that you DYOR to be sure of every financial step you would want to take as I won't be liable for any form of loss encountered by you.
Feel free to share with me your thoughts in the comment section. Thanks for your time once again. Gracias!
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**Disclaimer: This post is made as an education and not investment advice. Digital asset prices are subject to change. All forms of crypto investment have a high risk. I am not a financial advisor, before jumping to any conclusions in this matter please do your own research and consult a financial advisor.**
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Regards
@lhorgic♥️
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