CBDCs Are Not Worth The Risk, Says Former Bank Of England Advisor

The Bahamas, Nigeria, the Caribbean, China, and Jamaica are among the nations that have established CBDCs. Other countries, including Ghana, South Africa, the UAE, Thailand, Malaysia, Singapore, etc., have also launched theirs as a pilot program. However, despite the attention paid to these CBDCs, Tony Yates, a former Bank of England advisor, claims that the project is not worthwhile. According to Yates, there are far more risks and expenses associated with implementing digital currencies than advantages. In a Financial Times opinion piece, the advisor expressed his viewpoint. In case you forgot, the Bank of England is one of the central banks preparing to launch the CBDC.

But Yates opposes such a step.

Yates hasn't previously been a fan of cryptocurrency. Therefore, he thinks that cryptocurrencies are not the best options for use as money. He claims that exchanging currencies requires a lot of time and money. The cryptos also lack human-managed money supplies that guarantee a constant flow for inflation. The advisor specifically calls out BTC use as being speculative and illegal.

However, since 2022, illicit cryptocurrency transactions and activities have decreased, according to a CipherTrace report. The figure for 2020 was between 0.62 and 0.65%, according to the blockchain forensic company. However, the number dropped to 0.10–0.15% in 2021. The abovementioned report demonstrates how little Bitcoin is now used for illegal activities. Moreover, being a public ledger, it is accessible to everyone, closing doors to unlawful activity.

Additionally, its Layer-2 Lightening Network expedites remittance payments compared to before, refuting Yates' assertion that cryptocurrency transactions take a long time. Further, more applications for cryptocurrencies and stablecoins have shown up over time, indicating greater acceptance and adoption. Regarding CBDCs, Yates wonders why they are being implemented globally when numerous nations already have digital versions of currency in place. Yates believes that the currencies may be a means of suppressing cryptocurrencies like Bitcoin in this regard. But he emphasized that introducing CBDCs will make central bank reserves widely available to many people in addition to counterparties. Additionally, Yates contends that hiring personnel to develop and maintain the software and hardware for CBDCs will be a significant burden for central banks.

Other central banks have tested the waters, while Tony Yates advises the Bank of England against introducing CBDCs. Some of the findings are encouraging, such as China recording more transactions involving CBDCs. Others, however, are depressing, prompting a more cautious approach to its adoption. For instance, Nigeria's launch of the eNaira, a CBDC, saw a slow adoption rate. The Nigerian Central Bank, however, stated in an 83-page document for 2025 that it intended to investigate using blockchain technology to power its CBDCs. Additionally, it is thinking about the potential of stablecoins and how to manage its initial coin offerings (ICOs) over the next two years leading up to 2025.

According to another report, Tanzania is now cautious about implementing CBDC following its initial research. The Bank of Tanzania released a notice on January 14 detailing its research and preliminary findings, but it did not specify when it would choose to launch it. Since 2019, the nation has prohibited the use of cryptocurrencies.