You are likely to find some mutually beneficial interactions with central bank digital currencies (CBDCs), according to an industry executive.
While crypto is often associated with financial freedom, the concept of CBDC is often seen as the exact opposite. But that doesn’t mean there can’t be a balance between the two, according to Itai Avnery, Chief Operating Officer and Executive Vice President of cryptocurrency trading platform INX.
Central bank currencies and regulated cryptocurrencies are likely to complement each other in the future, Avnery said in an interview with Cointelegraph on December 22, as these two types of digital currencies have their own benefits.
Comparing CBDCs to regulated initial offerings, Avnery suggested that allowing or enabling crypto funds to participate in such offerings would be beneficial to both sides. This would expose these particular financial instruments to a wider audience while giving cryptocurrency investors the “comfort and confidence to trade in a regulated environment.”
“In my vision, the CBDC ecosystem will be no different, but we have a long way to go to get there,” said INX’s EVP, adding that balancing between central bank and cryptocurrencies would be a “major art.”
The exec indicated that he is not aware of any current initiative that would allow a person to purchase a cryptocurrency like Bitcoin using a CBDC or any other potential interactions between CBDCs and cryptocurrencies.
Avnery also noted the importance of combining regulation with decentralization because full decentralization leaves out regulations such as Know Your Customer (KYC) controls, which “come at a price that is sometimes not good for investors.” He said:
“When considering working with governments and central banks, I believe customers should be identified because it is in their best interest and builds the required trust in the ecosystem.”
Avnery emphasized that CBDC users still need to be able to interact in a private way “similar to how they might use physical cash today.”
The news comes amid INX entering into a partnership with certifying firm SICPA to help governments develop CBD ecosystems. As previously reported, INX was the first company to conduct a token IPO approved by the US Securities and Exchange Commission in 2021.
Related: Cryptocurrencies Could Spark the Next Financial Crisis, Says Reserve Bank of India President
The INX Executive Vice President is not alone in his belief that central bank currencies and cryptocurrency technology can be beneficial to each other in the future. Thomas Moser, a member of the board of directors at the Swiss National Bank, believes that centralized financial projects such as central bank digital currencies can enable more stability in the development of decentralized finance.
Mikkel Morch, CEO at digital assets hedge fund ARK36, also believes that CBDCs do not pose any direct threat to cryptocurrencies like Bitcoin. However, CBDCs can take some risks in relation to stablecoins such as Tether (USDT), according to Morsch.