Central bank digital currencies (CBDCs) could ultimately mean good things for the crypto industry, the CEO of the crypto exchange Binance said Tuesday (Dec. 21).
“Overall, I believe CBDCs are very positive for the crypto industry, but with a few caveats,” Changpeng Zhao wrote on the company blog.
Among those caveats? Zhang suspects most initial versions of CBDCs will be different in their fundamental properties to currencies such as bitcoin and ethereum.
He also expects most CBDCs to have an unlimited supply, with central banks potentially minting more at will, leading to possible inflation.
“Bitcoin, BNB [Binance Coin], and other cryptocurrencies usually have a limited supply,” Zheng writes. “BNB even has a decreasing supply built-in, with multiple burn mechanisms. This typically improves the ability of these coins to act as a store of value.”
He adds that most CBDCs will be permissioned.
“If you are just buying coffee, that’s probably fine,” Zhang writes. “But for meaningful transactions, such as investing your after-tax money in a project you like in a different country, you will likely be required to go through a lengthy approval process, and may even be flat out denied depending on where you are or other reasons.
There’s also the issue of high fees, which Zhang expects will occur when making cross-border transactions, or any transaction typically associated with steep transaction fees.
Read more: Exiting Singapore, Embattled Crypto Exchange Binance Retreats Again
So why does he think CBDCs hold some benefit? First, by issuing blockchain digital currencies, central banks will be providing a strong validation of blockchain, giving government approval to a technology once considered a fad.
Zhang notes that central banks and governments have begun educating people about crypto and blockchain, writing that “you can’t learn about blockchain without learning about bitcoin.”
Zhang’s comments come a little more than a week after his company, the world’s largest crypto exchange in terms of volume, withdrew from Singapore, the latest in a series of setbacks for the company.
So far this year, regulators in the U.K., Italy, Japan, Thailand, Malaysia, the Cayman Islands and Ontario have all accused Binance of operating illegally in their countries.