The Central Bank of Brazil recently christened its central bank digital currency or CBDC, Drex. A term that was previously synonymous with ‘digital real’. The brand name ‘Drex’ is an anagram where “D” and “r” represent Real Digital; “e” stands for electronic and the “x” is indicative of modernity and connection, highlighting the use of distributed ledger technology (DLT).
While it’s natural for enthusiasts to be fascinated by the evolution of real currency to digital, a spark of skepticism is also roused by implications of the crypto’s potential for central authority meddling. Last month Pedro Magalhães, a Blockchain Developer and Founder of Tech Consulting firm Iora Labs, revealed something concerning in the Drex code – functions that would allow a central authority to, potentially, freeze funds or even reduce balances.
Despite such concerns, proponents of the CBDC, like Brazilian Central Bank’s economist Fabio Araujo, believe in its potential to halt bank runs in the country. It’s touted as an improvement on the traditional banking sector that frequently suffers from bank runs and liquidity crises.
Given the rapid technological advancements sweeping across the globe, multiple countries including Russia, are actively adopting digital or crypto currencies. In fact, just last week, the Central Bank of Russia unveiled its CBDC, the digital ruble.
The growing popularity of such digital currencies does raise the question of their transparency, mobility and autonomy – characteristics typically associated with decentralized coins like Bitcoin. Especially when such digital currencies like Drex can theoretically be manipulated by a central authority.
Furthermore, if we turn our heads towards recently published proof-of-reserves on Binance, one cannot help but question the movement of assets of several popular cyrptos, including Bitcoin and Ether, post-Silvergate collapse. A prominent on-chain analyst has indicated that Binance purchased approximately 100,000 BTC and 550,000 ETH between March 12 and May 1, coinciding with the depleting reserves of USDC and the subsequent collapse of Silvergate Bank.
This reminiscence of traditional banking crises unfolding within the crypto space might sound an alarm to skeptics but also underline the importance for more transparency within the ecosystem. Such examples also stress on the intent to find balance within the industry to solidify trust of investors and enthusiasts alike.
The future of currencies is digital, that’s undeniable. However, it’s not without its potential perils and the community needs to stay vigilant. The era of CBDCs beckons, whether one approaches it with enthusiasm or skepticism, it remains to be seen whether they will be a force for good or harbinger inadvertent chaos.
Source: Cointelegraph
