As Central Banks across the world are increasingly considering venturing into the virtual currency space, it is worthy to consider whether central bank-issued digital currencies (CBDCs) are the right way forward as we move towards a global currency in an increasingly global economy.\r\nThe Ethos of Digital Currencies\r\nThe Bitcoin white paper, released in 2008, presented a simple yet brilliant idea to the world: a peer-to-peer electronic cash system that would eliminate the need of third party financial institutions to process and validate transactions, and that of governments to regulate currencies through monetary and fiscal policies.\r\n\r\nSatoshi Nakamoto made a valid point: the traditional payment system is essentially trust-based and thus suffers from all the weaknesses inherent in such a model. Merchants and consumers are wary of the other and a degree of fraud is accepted as inevitable.\r\n\r\nTrust-based models necessitate for trades to be carried out through a trusted third party, usually financial institutions or state authorities like central banks. Consequently, these third parties benefit from unchecked influence and authority over commerce, people\u2019s monies as well as their private data.\r\n\r\nThe decentralization of VCs ensures that no single entity controls the system. Instead, the digital payment mechanism is secured by honest nodes who collectively control the CPU power required to fuel the system. Therefore, the value of VCs is determined solely by the market without any influence whatsoever from monetary and fiscal policies or unstable geopolitics.\r\n\r\nFurthermore, individuals are forced to bear exorbitant costs of transactions in terms of intermediate fees. Since trades are reversible, trusted third parties are required to act as mediators and verify transactions as well as resolve any disputes between merchants and consumers.\r\n\r\nHowever, as globalization brings the world economy closer and commerce is increasingly carried out across national borders, high transaction fees impose an undue burden on multinational trades.\r\n\r\nVirtual currencies, like Bitcoin, offer an alternative mechanism which relies on mathematical, cryptographical proof and removes the \u2018trust\u2019 factor in the system. Irreversible transactions make the system immutable, thus protecting sellers and buyers from fraud.\r\nCBDCs: The Future of Finance?\r\n2019 saw the world moving beyond the mere hype of cryptocurrencies and recognized its potential as an alternative payment system that is independent of government or banking control. Dissatisfied with governance of modern currencies and their fluctuation based on increasingly unstable politics, people are increasingly gravitating towards cryptocurrencies.\r\n\r\nGovernments seemed to have jumped on the bandwagon and central banks across the world are contemplating launching their own digital currencies.\r\n\r\nRecently, six leading central banks \u2013 the Bank of England, Bank of Canada, Bank of Japan, European Central Bank, Sveriges Riksbank of Sweden, Swiss National Bank and the Bank for International Settlements \u2013 announced their intentions to work together to assess the potential of CBDCs in their jurisdictions.\r\n\r\nPresident of European Central Bank (ECB) and former Chair of the International Monetary Fund (IMF), Christine Lagarde, has repeatedly argued that central banks must embrace \u201cchange and new thinking.\u201d According to her, reserve banks must move beyond regulation and be active players in shaping the future by issuing a new digital form of currency that satisfies public policy goals.\r\n\r\nChina is already making strides in the arena: The People\u2019s Bank of China (PBoC) launched the world\u2019s first pilot CBDC in December 2019 after half a decade of research. Controlled entirely by PBoC, China\u2019s digital legal tender is wholly backed by government reserves. In a press release earlier this month, PBoC announced that the CBDC program was \u201cprogressing smoothly\u201d and that it planned to \u201csteadily advance the development of legal digital currencies.\u201d\r\n\r\nOn the other hand, the Reserve Bank of India (RBI) remains on the fence. In an interview with a local news outlet, RBI Governor, Shantikanta Das, stated that while the institution was beginning to explore the issue, they believed the technology to be in its infancy stage and lacking adequate safeguards to seriously consider a CBDC.\r\nCBDCs vs Cryptocurrencies\r\nWhile CBDCs will be based on blockchain technology, much like cryptocurrencies, they are conceptually no different than traditional currencies issued in digital form. They will be issued and governed by a nation\u2019s central bank and hence prone to manipulation through monetary and fiscal policies, as well as the country\u2019s international relations.\r\n\r\nTherefore, CBDCs are fundamentally different from VCs. They do not overcome the problem of \u2018trust\u2019 and the immense control that mainstream institutions hold over our money.\r\n\r\nIn a globalized world with an intricately interconnected economy, people have become global citizens and consumers. However, their international identities are vulnerable to political factors and restrained by the currency of their home country.\r\n\r\nBarely a month into the new year, we have already seen how currencies and the economy are impacted by political factors. The rising tensions between US and Iran and the medical emergency caused by coronavirus demonstrate how political factors can result in financial fallouts.\r\n\r\nAnd this has always been the case: The announcement of Brexit caused the GBP to plummet \u2013 a fall it has yet to completely recover from; and Trump\u2019s surprise victory in the 2016 U.S. Presidential Elections resulted in an across the board spike for the USD.\r\n\r\nThe political climate is only becoming more unstable - national and regional politics is ever more fragmented; middle east remains a highly volatile region; and political uncertainties in countries like Venezuela, Argentina and Brazil make the global economy (and therefore, national currencies) vulnerable. As we witnessed during the U.S. \u2013 China trade tensions, markets are susceptible to state interference and \u2018weaponization\u2019 of economic tools such as currencies.\r\n\r\nAs UN Secretary-General Ant\u00f2nio Guterres pointed out, people today have little confidence in their governments. In fact, a staggering 66 countries experienced massive public demonstrations against state establishments in 2019.\r\n\r\nIt follows that members of the crypto community will have little confidence in CBDCs. People who use crypto are attracted by its technology, decentralization, low transactional costs and absence of bureaucratic red tape. While CBDCs offer inherent acceptability, they fail to address any of the challenges posed by fiat currencies and have none of the features that drew people to crypto.\r\nA Global Currency for a Global Economy\r\nTherefore, the crux of the issue is that CBDCs are an inadequate answer to the consumer\u2019s problems.\r\n\r\nOn an individual level, people today are increasingly engaging with the global economy and purchasing global goods and services. Subsequently, there is a growing need for a currency that is not tied to nation states and thereby subject to the ever-changing political winds and whims of the elite.\r\n\r\nNational currencies, including CBDCs, do not meet the needs of modern, global citizens who are looking to take control over their monies.\r\n\r\nIn this case, perhaps the way forward lies in the development of a single global cryptocurrency that is based in technology and upholds central ideals like security, transparency, immutability and democracy. Applied correctly, technology can allow people to become decision-makers and have a say in the governance of their currency.\r\n\r\nA global currency would be accessible to anyone with an internet connection \u2013 regardless of national borders and geopolitics \u2013 and could thus potentially serve the needs of today\u2019s diverse consumer base.