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Can a Digital Dollar Be the First CBDC After All?

April 17, 2020

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Can a Digital Dollar Be the First CBDC After All?

Hyperledger-backed project eThaler is set to create a central bank digital currency (CBDC) and other digital currencies tailored for state-backed centralized systems on top of the popular Ethererum blockchain. 

Recent state reports suggest that there is an increasing amount of drafts towards the US government subjecting the term “digital dollar” or “digital currency”. That might be indeed an increased interest towards digital currencies from the regulatory regime, or simply a FOMO accompanied by the ongoing pandemic. 

Although the US has kept its distance from the global race for a central-bank digital currency (CBDC), the Coronavirus pandemic has increased concerns and indeed has sparked excessive consideration of a digital dollar – especially when compared to China where it has already focused its state-level R&D on its own CBDC, amid growing concerns regarding the physical handling of fiat currencies that might be carrying trails of the COVID-19. 

Read More: South Korean Government Program to Empower Blockchain Startups with $3.2mn

eThaler in a nutshell

Coined after a silver coin used in the European region for hundreds of years, from which also the word “dollar” originates, eThaler is a Hyperledger Blockchain Consortium project that wants to use the Ethereum blockchain to develop smart-contracts that would enable the issue and maintenance of a gov-backed digital economic system. 

Similar to other cryptocurrencies and/or digital tokens, eThaler is divisible into smaller units, tailored for digital micropayments, with the key difference here being the fact that eThaler wallets are filled directly via a bank, eliminating the risk of undergoing the central authority. 

Besides IBM and the Linux Foundation who are the pillars of Hyperledger, eThaler is backed by Accenture, InfoSys, and the Itau Bank of Brazil, while the blockchain of choice is an Enterprise version of Ethereum called Hyperledger Besu, co-developed between Hyperledger and the top-shelf Ethereum studio ConsenSys.

The project is supposed to be open-source and anyone could build on it, meaning that we could see a series of public stablecoins, private digital currencies as well as central bank digital currencies (CBDC) popping out of eThaler.

Read More: China Plans To Feed Its State-Backed Blockchain With An Additional $4.7mn Investment

At what stage are CBDC now?

Depending on how you see it, eThaler could be either the way-in for the states, or Hyperledger’s attempt to taunt R3, who has been recently on an acquisition spree, expanding its operations to European and South-Asian governments. 

Judging from their respective clients and level of expertise when it comes to blockchain technology, R3, and Hyperledger are basically the two leading rivals in the sphere of CBDC. Even countries who claim that they have developed their own native digital currency, rely on the above DLT systems.

China is the first country that revealed a government-backed cryptocurrency is being developed to upscale the country’s financial strength unto new heights. Ever since, many individual European Union member states, as well as the EU collectively have expressed their will to create a counter-currency to tackle the increasing competition.  

Read More: Russia Plans To Ban Public Crypto Operations, While A CBDC Is Under Discussion

What scared central governments the most though, would be Facebook’s attempt to launch its own digital currency named Libra, one that would be backed by a basket of sovereign currencies if it ever managed to make it out to the markets.

Other countries interested in CBDC include but are not limited to Russia, Switzerland, Sweden, Canada, and Japan, and while the world’s first CBDC is still a no man’s land, whoever conquers the title of the first CBDC issuer pretty much gets to say what’s next when it comes to the technopolitical aspect of distributed ledger systems.