Byline: Hannah Parker
Digital currencies have grown in popularity in recent years as cryptocurrencies such as Bitcoin have dominated the mainstream market and captivated the attention of millions around the world. This rise has also caused concern among the world’s central banks, concerned that their growth may undermine domestic currencies.
In response to these concerns, central banks worldwide have been researching the feasibility of developing their own digital currencies. Almost 100 countries are actively assessing central bank digital currencies (CBDCs), as reported by the IMF, and a few have already started rolling them out, including Kazakhstan.
What are Central Bank Digital Currencies?
A CBDC is digital money. Similar to conventional fiat currencies, it gives holders a direct claim on the central bank and enables corporate and private transactions. Digital currencies aid in reducing potential dangers to the consumer, such as the implosion of a commercial bank, and create a direct connection between clients and a central bank.
Central banks were worried about losing control over the flow of money and payment systems due to the increasing popularity of cryptocurrencies. The proliferation of payment methods that any public or centralised agency needs to regulate could erode central banks’ control over the money supply and undermine economic stability.
Digital currencies inspire the concept behind CBDCs like Bitcoin and Ethereum. But there are variations. Cryptocurrencies are decentralised and unregulated. They are erratic because investors, usage, demand, and conjecture determine their value. The fluctuations in the price of Bitcoin over the past 12 months demonstrate this unpredictability. CBDCs are intended to be more stable and safe because their value is tied to a nation’s currency.
CBDCs and cryptocurrencies leverage networked electronic resources to generate, track, and validate transactions. However, many CBDCs have a central database run by a central bank that assigns each “e-coin” that is released a unique serial number as a means of identification.
Midway through December 2022, IMF Managing Director Kristalina Georgieva addressed the Atlantic Council and declared, “The record of money is penetrating a new chapter.”
She continues, “Countries are experimenting with new digital forms of money while trying to preserve important elements of their conventional banking and monetary systems.”
Kazakhstan’s Central Bank Start CBDC Rollout.
The Central Bank of Kazakhstan (CBK) will start rolling out its CBDC between 2023 and 2025 after passing the second round of testing its compatibility and functionality with the national economy. Due to this, the CBDC is anticipated to play a significant role in Kazakhstan’s economy as of 2025. The central bank described the innovation as an effort to recognise the need for technical advancements, infrastructure expansion, and an appropriate regulatory framework to support the progressive implementation of the CBDC.
The CEO of Binance hinted at the launch of Kazakhstan’s internal CBDC and the prospect of including it on the Binance Smart Chain (BSC) in October 2022.
One of the largest crypto mining nations in the world, a representative from Kazakhstan stated that it was investigating the potential and compatibility of CBDC with its economy. The study’s findings highlighted opportunities and difficulties that Kazakhstan’s economy should address. During the second testing phase, the bank examined the digital Tenge’s compatibility with its monetary policy, economy, and financial stability.
The importance of adequate stakeholder engagement in different phasing situations was reinforced in the research’s conclusion sections, which concentrated more on offline payment and programmability.
According to the research from crypto experts at Bitsoft 360, the oil-rich Asian nation generated 13.22% of the overall Bitcoin hash rate in January 2022, averaging 24.8 hashes per second every month and obtaining the majority of its energy from fossil fuels such as coal and natural gas.
During the state-wide crackdown on cryptocurrency mining and trading by the Chinese government. Kazakhstan was one of the first nations to take in displaced Chinese crypto miners.
The crypto market is expected to expand more quickly than ever. While several nations declare their support for cryptocurrencies and initial coin offerings (ICOs), major firms like Google and Microsoft also outlaw cryptocurrency advertising. Simultaneously, while many people support “blockchain” technology, they do not comprehend its applications. Do you need help with the need for national cryptos? The reason for this is that governments all over the world do not want decentralised currencies that are not under their control.
For this reason, authorities want to create their national cryptocurrency, a digital version of fiat money. Additionally, some nations have assumed that having a national cryptocurrency will improve their accounting and reduce printing expenses. Many nations have either resorted to creating domestic cryptocurrencies or have at least begun to consider doing so.
