Binance CEO Elucidates Can Governments Ban Bitcoin To Promote Their Central Bank Digital Currencies?

The founder of Binance, Changpeng Zhao (CZ) stated that issuers of central bank digital currencies (CBDC) should not isolate CBDCs from the cryptocurrency industry as a whole.

Changpeng Zhao suggests that the use of CBDCs by central banks will have a positive impact on the economy. He warns regulators against isolating central bank digital currencies from crypto and believes that this is an additional tool for central banks as governments can force shops and merchants to accept digital currencies this, in turn, drives adoptions of wallets and the start of using cryptocurrencies for many.

Zhao noted that the crypto exchanges will need permission to use CBDCs from various jurisdictions. The process of obtaining a license to use digital currencies of the Central Banks will be quite lengthy, the integration will take longer but such a scenario will provide a nice opportunity to trade crypto against regulated CBDCs like Digital USD, Yuan, Euro, or GBP.

“If or when CBDCs open up their permission to allow crypto exchanges to integrate it, that will be a very good fiat on-ramp. If their permission scheme is open, then it may replace many of the stablecoins in existence today.”

CZ explained CBDCs can have the following drawbacks.

• The first is an unlimited supply. Most CBDCs will have an unlimited supply which could lead to inflation. He explained that BTC, ETH, or BNB have a limited supply with a burn mechanism that reduces the supply of coins over time.
• Second, users will need permission from the Central Banks to use CBDCs. CZ stated that to buy a coffee with a CBDC is fine but for any larger transaction like investing your money in a project in a different country, you will likely be required to go through a lengthy approval process.
• Third, high transaction fees. Especially, the fees will increase with cross-border payments compared to most cryptocurrencies.

Can governments ban bitcoin and other independent cryptocurrencies in order to bolster their central banks’ digital currencies? Zao replied:

“Many ask me, “will CBDCs replace Bitcoin?” For the differences mentioned above, I think that’s unlikely to happen. Although, it is not inconceivable that a Central Bank may issue a permissionless, limited supply coin with low fees. If that happens, people in that country may indeed have less need for Bitcoin. But as we all know, a good percentage of Bitcoin holders these days don’t necessarily view Bitcoin as a currency alternative anyway. So perhaps this comparison between Bitcoin and CBDCs isn’t worth making at all.

It’s also conceivable that governments may “ban Bitcoin” in order to promote their own CBDC. Clarification on “ban Bitcoin”. So far, I know of no country that made owning Bitcoin illegal. So, there is no “ban Bitcoin” anywhere.”