Central Bank Digital Currencies may have only recently started to gain some traction in the general blockchain community, but it's predicted that 2020 will be a completely new chapter for this rather young sector of the industry.
Naturally, it doesn't necessarily represent the true aspects of the blockchain, such as decentralization and identity protection, but it does bring in some very handy perks such as momentary confirmation for large transactions and very little overhead.
Although the trend was started by the second-largest economy in the world (China), it's likely that the tendency towards developing this sector will be dominated by emerging economies in the future. There are a few reasons why this would happen.
The first reason is the age of the industry itself and how much it can be customized.
You see, when it comes to manufacturing, mining raw resources or pretty much any other established industry, developing nations have very little chance of catching up to developed economies in these cases. The infrastructure and the amount of investment in these developed nations are just too sophisticated.
However, when it comes to industries that have just recently been established or are being popularized right now, emerging economies can find some kind of speciality in them and use them as their primary tool as an economic boost.
When it comes to financial technology, the amount invested and the amount gained is usually much better when compared to actual, physical industries such as mining or farming.
Taking advantage of the CBDC industry right now would be a perfect economic decision for the future. imply having experienced engineers who work on establishing the platform could prove to be one of the, if not the most important export "products" for a country.
Being First is Important
Being first is important for awareness. Simply having several articles mentioning that developed nations just created their very own Central Bank Digital Currency, could see that CBDC used all over the world by blockchain enthusiasts.
Once the first batch of users is acquired, it's pretty much guaranteed to keep them in the long run, thus increasing the CBDC's trading volume and keeping it a dominant force on the markets.
Even if the currency fails compared to CBDCs from China or the USA, it will still have some presence on the market due to past success.
More Government Involvement in Developing Economies
Developing economies tend to have a lot more government spending campaigns in order to improve the investment environment. What this means is that the government of a developing nation is far more likely to approve a CBDC project if it sees some kind of potential in the future.
For developed economies, government involvement is an extremely rare occurrence. It needs to be connected to immediate income rather than future advantages, thus giving the industry a bit more bureaucracy to deal with.
In emerging economies, having government projects which can be assigned to private companies tend to be the best way to go about creating the infrastructure of a new industry, and we can already see that in terms of CBDC and blockchain all over the world.
Payment Efficiency is Very Important
A recent survey revealed that central banks in developing nations are more likely to favour faster transactions compared to developed nations. Although this is a slightly vague analysis, there could be some reason behind it.
Developing economies usually have a lot more foreign income compared to developed ones. For example, it's believed that far more people living in developing nations work with foreign companies compared to developed ones.
The keyword here is "people", meaning that employees tend to come from these developing nations while the employers are located in countries like the US or the UK.
This gives the central banks quite a lot of funds to deal with as they come in. Considering that most of the local economy depends on consumer spending, it's in their best interest for people to receive their salaries as fast as possible so that they could spend it as fast as possible.
The Bottom Line
The bottom line of the Central Bank Digital Currency is that developing nations are scrambling to find an industry they can call their own. An industry that does not rely on the cooperation of other countries but provides value by default.
Should these nations finally get their hands on CBDC dominance, they could finally find themselves in a position of power compared to their developed contemporaries.
And that is the first stepping stone to changing their status to "developed" nation.