By Iain Young
TECHNOLOGY is being developed at rapid speed, and while some new tech might not last outside a "locked down" world, others have found a permanent place in our daily lives. Cryptocurrency, it seems, is one that is here to stay.
Cryptocurrency will soon make its way into our daily lives – it’s no longer something just for "geeks, "nerds" and those seeking to operate in the dark, away from prying legal and regulatory eyes. The virtual currency has been thrust into the spotlight of late. Its increase in value during 2020 has helped it become universally recognised.
Central Bank Digital Currencies (CBDCs) are a new type of currency that governments around the world are experimenting with in the hope and expectation that their development will lead to increased payment efficiency and lower costs than the established Fiat currencies (government-issued currencies that are not backed by a commodity such as gold). For those of you wondering whether CBDCs will replace cash, the short answer is no. There will always be cash available for those who want to use it.
But, as the development and adoption of this asset form gains speed, we must ensure its security. A balance must be struck between a central quasi-governmental body, collecting enough information about CBDC users to prevent issues such as fraud and double spend, and the secure handling of this data to ensure that it’s used for the right purposes and doesn't fall into the wrong hands.
But how will all this work in practice? For the end user, generally speaking, the mechanics of how they get paid and how they are able to access their funds is of relatively little importance. Nonetheless, the issuers of CBDCs will need to make policy decisions on how they deploy "Distributed Ledger Technology" – a protocol that enables the secure functioning of a decentralised digital database – to deliver the anticipated payment efficiencies and lower costs, as well as to balance a permissioned v permission-less blockchain. There will also be wider security issues to consider, with regards to whether it is more appropriate for CBDCs to be account based or token based.
But is there a genuine appetite for consumers to have access to CBDCs? We have all been conducting our day-to-day affairs differently during Covid-19 lockdowns. Instead of carrying notes and coins in our wallets, we pay for our weekly shop either with cards or our mobile phones – a cheque book is fast becoming an endangered species. This rapid shift to an almost cash-free society has only accelerated appetite for, and acceptance of, change. Personally, I think it is only a matter of time before the vast majority of payments are carried out using CBDCs, and those governments which accept this proposition and plan accordingly are those that will reap the benefits. Where innovation leads the state must surely follow.
Iain Young is a Partner at Morton Fraser
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereLast Updated:
Report this comment Cancel