The world is moving towards digital currencies and recently because of the COVID-19 pandemic, there have been huge developments in this particular sector. People are looking for various alternatives to continue contactless payments and digital currency is counted as the best one these days. To a greater development, different governments across the world are trying their hands on digital currency but China is the one that is quite ahead when it comes to central based digital currency CBDC.
Recently China was doing trial launches for CBDC which indicates that it might challenge the US Dollar with it. Although China is doing different trials currently but it will be the first big country to launch CBDC across the world. Apart from China, Venezuela is the one that has already launched its digital currency, back in 2018 only. However, it has been seen that launching its own cryptocurrency was not a great success in Venezuela.
Venezuela launched Petro to deal with the recession
During the time when Petro was launched in Venezuela, people and the government were having high hopes that the economy of the country would be able to revive through this. Within the few hours of its launch, the investors started investing in Petro and they bought it worth around $735 million. The crude oil reserves of the country which are the largest ones in the world are backing this crypto.
Before the launch of Petro, the Venezuelan government has assured its citizens that it is absolutely safe, unlike other cryptos. The country was hoping for a better economical revival by introducing this digital currency. It was also widely promoted by the government that Petro is going to play a huge role in correcting the situation of hyperinflation in the country. Even though the government was expecting to revive the economy, all the hopes turned upside down.
Venezuelan Petro turned out to be a flawed one
Despite the government being quite confident about Petro, various experts from Venezuela believed that this is not going to be of great help. One of the major reasons that people found this CBDC to be flawed is that it was not available on any major crypto exchanges. A lot of people have also raised their concerns about whether Petro is actually backed with Venezuelan oil or not.
Through several reports, it was revealed that Petro was backed by a national oil company, PDVSA and the company was already under a debt of $45 billion. Along with this, there were not any kind of signs of trading activity that could prove any credibility to Petro.
Following this when people started questioning the digital currency, Nicolás Maduro, the president of Venezuela was forced to increase the value of the currency. The people were in outrage when he converted the pension bonuses of the citizens into Petro. People started protesting across the country and had shown their disbelief in oil-backed Petro. It was reported that even by the end of 2018, the government failed to get Petro listed on any major crypto exchanges. On top of it, the administration of US President Donald Trump has banned all the people of the country from purchasing Petro. This was another downturn for the currency which has led to its failure.
High time to explore CBDC
During the COVID-19 pandemic, it is made quite clear that the economy of any particular country cannot be dependent on fiat currencies. During the time of crisis, digital currencies are seemed to be the best alternative that also helps to lift up the economy. Now with this, central banks across the world are moving towards digital currencies and seeing potential use cases of blockchain technology as well.
As mentioned above, China is the first big country to introduce its CBDC, there are other countries as well that are working towards it. The Deutsche Bank Research has shown that across the globe, there are around 20 digital currency projects. The central banks across the world are researching the proper use cases of digital currency and whether it will be successful in their country or not. One of the major things that all the countries would benefit from CBDC is that it will make global trade more efficient along with minimizing the risk associated with it. It will also bring a high level of transparency and traceability in the financial system which will give extensive protection against different financial crimes. The central banks will be able to increase the effectiveness of the monetary policy that will lead to a better financial system.
This is an undeniable fact that CBDC is going to bring one of the biggest revolutions in the financial world across the globe. As far as Venezuelan Petro is considered, the government is required to give a proper picture to the citizens. The citizens of the country should be well aware of what the government is offering and how it is going to benefit them. Only then, they will be able to move towards its mass adoption that will also improve the overall economical condition. Along with this, the government is also required to explore all the technical faults which are there in its CBDC. This is one of the biggest challenges that the country needs to tackle.