Binance chief flags drawbacks of CBDCs

Central bank digital currencies (CBDCs) have drawbacks that could deter consumers, said Binance CEO Changpeng Zhao in an interview with Bloomberg.

According to Zhao, CBDCs differ from cryptocurrencies such as Bitcoin and Ethereum in many respects. In particular, they are controlled by monetary regulators and have no emission cap.

“Ultimately, these are the core properties that concern most users,” Zhao noted.

The Binance chief also commented on the new Ethereum price peak. In his view, the rise in the asset’s price was driven by the popularity of applications on this blockchain. Additionally, the second-largest cryptocurrency supports more types of transactions compared with Bitcoin.

Zhao said that around 70% of Binance users are retail clients, and the rest are institutional investors. The company is profitable and does not need to raise additional capital. The exchange does not plan to list its shares on the stock market, as last month this did Coinbase.

According to the consulting firm PricewaterhouseCoopers, CBDCs are being developed by 60 central banks around the world. The leaders, according to analysts, are the Bahamas and Cambodia.

In October 2020 Zhao said that the first versions of CBDCs would prove to be “quite centralized”. In his view, they will use blockchain but will be very different from Bitcoin.

On May 3, 2021, the nonprofit Digital Dollar Foundation, which is behind the development of the digital dollar, said it would launch five “real-world conditions” pilot projects. The initiative is aimed at studying the operation of the instrument that the Fed could issue.

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