Are CBDCs and bitcoin a match made in heaven?

If you ask Katie Fortune of the Bank of England, they can central bank digital currencies (CBDCs) and bitcoin (BTC) coexist just fine. During a panel at the Citi Digital Money Symposium Fortune was asked how CBDCs and bitcoin would relate to each other in the future. She indicates that she envisions a mixed ecosystem with different forms of money, similar to what we see today.

What are CBDCs?

A CBDC is basically the digital version of a government currency, for example a digital euro or dollar. In theory, this could allow central banks to gain even more control over the financial system and steer the economy in the direction they deem best.

If inflation is high, for example, they can immediately give people a higher interest rate on CBDCs to make it more attractive to save.

That could make it possible to solve problems such as inflation a little faster. On the other hand, you may also get into trouble more quickly, because it is always difficult to estimate the after-effects of these kinds of decisions.

In that respect, it remains to be seen whether CBDCs are really an improvement for the world. But we will probably find out soon enough, because almost every central bank seems to be developing a digital currency version of their fiat currency right now.

CBDC is a bridge

Fortune sees CBDCs as a powerful tool and bridge of sorts. “I think it can be very powerful in a world of stablecoins and other digital forms of money to have a central bank digital currency that can bridge all the different forms of money,” said Fortune.

“That can also ensure that you don’t end up with all kinds of different ecosystems,” she continued. That is what we often see now, that there are all kinds of systems that have difficulty communicating with each other.

According to her, a CBDC can solve that by acting as a kind of bridge between the different technologies. But then it must be possible, for example, to have a bitcoin or other crypto currency communicate with those CBDCs. That would be very interesting, but it is still a long way off.

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