- Bitcoin’s attractiveness as a financial revolution remains undisputed.
- Central Banks are fighting the impending revolution through CBDCs.
Bitcoin is frequently praised as one of the most innovative developments in the financial industry since the internet’s inception. Its decentralized nature, which allows transactions to take place without the need for intermediaries, has ushered in a new era of financial independence and autonomy for individuals and enterprises all over the world.
According to reports, Bitcoin has performed quite well since the beginning of 2023 in comparison to every other asset class. By holding Bitcoin over a period of time, an individual can potentially benefit from the price appreciation of the cryptocurrency. Additionally, because there is a limited amount of Bitcoin, its value may climb over time as demand increases.
In the long term, individuals can attain financial freedom by using the self-custodial method. Using this method, individuals can fully control their money and reduce the possibility of theft or fraud.
However, it also requires a significant level of responsibility and diligence to ensure that investments are stored securely and managed effectively. Against this backdrop, some blockchain protocols such as AllainceBlock have developed secured wallets to help users secure their Bitcoin holdings.
Furthermore, individuals can also achieve financial freedom through Bitcoin investments by using the dollar-cost-averaging (DCA) technique. This method involves buying a fixed amount of Bitcoin at regular intervals, regardless of the current market price. Interestingly, El Salvador used this strategy in 2021 following its decision to legalize Bitcoin as a legal tender.
Bitcoin Pushback, the Case for Government CBDC Emergence
Although utilizing Bitcoin has many advantages, governments are growing more concerned about the potential threat that the decentralized crypto innovation poses to their sovereignty.
In a bid to prevent a complete takeover, Central Banks are now pushing for their own National stablecoins or Central Bank Digital Currencies (CBDCs). Countries like China have advanced testing and retail trials of the innovation with PNB Paribas recently partnering with the Bank of China to launch a digital yuan wallet to support its corporate clients for both offline and online payments.
Because Bitcoin is decentralized, it works outside the supervision of any government, making it difficult for governments to monitor and regulate its use, hence giving CBDCs better leverage across the board.
Over the years, this lack of control has raised concerns among policymakers that Bitcoin could be used for illicit activities such as money laundering, tax evasion, and financing terrorism.
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Besides China, countries like Australia, and UAE, amongst others are also attempting to protect their sovereignty in the face of the Bitcoin revolution by creating their own Central Bank Digital Currencies (CBDCs).CBDCs, as opposed to Bitcoin, are centralized and issued by governments, making it easier to regulate and keep an eye on them.
Notably, CBDCs can also be designed to support government policies such as monetary stimulus, which makes them a more attractive option for policymakers and banks like BNP Paribas lending out support.
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