In today’s Exponential Investor:

  • What are central bank digital currencies?
  • What is the difference between CBDCs and cryptocurrency?
  • Will CBDCs destroy cryptocurrencies?

What are central bank digital currencies?

On 19 April 2021, the Treasury announced that the British government would be creating a new taskforce.

Its mission? To develop the UK’s first central bank digital currency (CBDC)…

Or as then-Chancellor Rishi Sunak dubbed it: “Britcoin”.

It’s new type of digital currency, issued by governments and central banks.

Think of them as digital-only version of the pound, dollar or euro.

To date, 105 countries are developing a CBDC. And ten of them have been issued into circulation already.

Will the government use “Britcoin” to spy on you?

Unlike the pound sterling, the dollar or the euro…

Central bank digital currencies – or CBDCs – are 100% digital.

When you take cash out at an ATM, the only information your bank receives is how much you withdraw and where.

Once that money is in your wallet, there’s no way to know where you spend it or what you spend it on.

On the other hand, CBDCs will be completely digital.

Which means, in theory, central banks and the government can track exactly what you spend with it, where you spend it and when.

What is the difference between CBDCs and cryptocurrency?

Cryptos like bitcoin are also 100% digital.

But unlike a CBDCs, cryptos are NOT issued by governments or controlled by central banks. That’s why they’re called “decentralised” assets.

And they’re also not regulated by the Financial Conduct Authority: so, if you get into trouble – you’re on your own (for the most part! Some aspects of the crypto markets now fall under regulation).

On the upside, the government can’t see how much crypto you own or see what you spend it on.

On the downside, without many rules and regulations, the crypto markets are riskier and more difficult for investors to understand. It’s like playing rugby with no rules or referee.

But many investors fear that if government gets its claws into the crypto market, it will impose too many rules and ruin the game completely.

Will CBDCs destroy cryptocurrencies?

Of course, nobody wants the government’s slimy hands in their pocket telling them what they can and can’t do with their hard-earned cash.

At the moment, the crypto markets are too large and widespread for the government to rein them in completely and install “Britcoin” instead.

Loyal crypto investors have shown time and time again that they are incredibly resilient and resourceful.

The Chinese government has attempted to ban crypto and replace it with their “digital yuan” no fewer than six times… yet the country is STILL one of the biggest bitcoin mining hubs in the world.

Before you go, check out this recent interview I gave about CBDCs…



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Sam Volkering
Editor, Exponential Investor