Question

Given all the negative effects of bitcoin, why are many central bankers contemplating the release of their own digital currency? What are the possible benefits?

Answer 1

It's true that Bitcoin has many negative effects the most prominent one being constant fluctuation of it's price. This makes it very difficult for everyone to use it. And the government is afraid due to lack of central authority to control the crypto currency.

But ,at the same time it has many benefits which is why many central bankers are contemplating the release of their own digital currency.Few of them are, since control is totally decentralised, the fraud risks for buyers is very less. These crypto currency helps the buyers in completing their transactions without providing any sensitive financial information (like credit or debit card details) to the seller.

Inflation risks is very minimal . Inflation happens when government uses more money over the year which in long term decreases the purchasing power of citizen. But the crypto-currency are fixed in number and finite (total value is fixed). Therefore without the possibilities of issuing excess currency, the threat of inflation comes down to a huge extent. Crypto-currency is a good model to tackle inflation.

Also, no or very low associated transaction charges are levied upon the crypto-currency.

The Crux of all the benefits is that no personal information is associated with the transactions which makes crypto currency extremely safe and very difficult to breach.