Changpeng Zhao, the CEO of crypto exchange Binance, has said central bank digital currencies (CBDCs) may replace many existing stablecoins, but not Bitcoin and other cryptocurrencies.
According to him, the emergence of CBDCs will benefit the cryptocurrency sector, albeit with a number of reservations. Zhao said:
"Today, central banks and governments are educating the masses about blockchain technology and cryptocurrencies. And guess what, you can’t learn about blockchain without learning about Bitcoin. And when you learn about Bitcoin, you learn about the valuable fundamental properties of money - scarcity, freedom to transact, and low fees."
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Authorities can quickly get traders to accept CBDCs, which will stimulate the adoption of digital wallets and encourage many to use cryptocurrencies, he has said.
In addition, the emergence of a digital form of fiat money may increase the flow of funds to crypto exchanges, according to Zhao. At the same time, he has noted CBDCs differ from Bitcoin and some other cryptocurrencies on a fundamental level.
Zhao is confident that most central bank digital currencies will be inflationary, with restrictions on certain transactions and high fees when used.
He has admitted some central bank could issue a CBDC with limited issuance, free transactions and low fees. This will reduce the demand for Bitcoin in this country, but will not displace cryptocurrencies.