Central Bank Digital Currencies (CBDCs) are the hottest trend in the global banking sector with multiple projects underway and one CBDC already live in the Bahamas. Talking on this matter, Binance CEO Changpeng Zhao noted that he believes the rise of CBDCs could be a threat to Bitcoin if a more advanced version of it was developed.
In an interview with Jeff Roberts, senior writer for media publisher Fortune, Zhao was asked about his views regarding the People’s Bank of China’s digital yuan initiative and how it would affect the crypto industry as a whole.
In his response, Zhao said that any blockchain or cryptocurrency would be good for the industry because it legitimizes digital assets and broadens awareness regarding this new technology and asset class.
He added that despite the race that is on amongst major nations to launch a state-backed digital currency, these CBDCs are likely to be more restrictive initially but would evolve over time.
Bitcoin could be replaced
The CEO was directly asked about what threat CBDCs pose to Bitcoin, to which he responded saying that very few CBDCs boast the same freedom as Bitcoin and they would be highly centralized and controlled.
However, he warned that the scenario could be different over the long term:
“If there is a government pushing another cryptocurrency that’s even more open, more free, has less restrictions than Bitcoin, and is faster and cheaper to use, then that would threaten Bitcoin. But that is good for the industry, it’s just something better than Bitcoin, and would replace it.”
He continued that a change would not be a bad thing, and compared this HTML5 replacing HTML4.
Zhao was also asked if Binance had plans to issue a Yuan paired stablecoin to further complement the existing stablecoins on the exchange. He responded that it’s not happening anytime soon, adding that there were too many restrictions concerning capital flight from China.
Digital currencies could hurt the financial system
However, opinions seem to vary when it comes to the recent rise of the CBDC trend. According German politician and executive board member of the country’s central bank, Burkhard Balz, a digital Euro could be a potential threat to the financial system if it is used a store of value.
Meanwhile, last year, the Basel Committee on Banking Supervision, an international body that constitutes 60 banking regulators from several other countries, published a paper stating that despite the crypto industry being too small compared to the global financial system, the expansion of the crypto industry could turn out to be risky for the banks as well as the global economy.