In a Twitter thread, Tether's CTO Paolo Ardoino says that CBDCs will update the aging infrastructure that fiat currencies rely on — but little else will change.
Tether's chief technology officer has predicted that central bank digital currencies won't kill off private stablecoins.
In a thread on Twitter, Paolo Ardoino argued that fiat currencies like the dollar and pound are mostly digital already — but primarily rely on "outdated tech infrastructure built 30 years ago that is kept together with rubber and bands."
Ardoino said that these aging systems require a "ton of maintenance with enormous costs" and lack standardization — prompting central banks to begin exploring how they can modernize their offerings. He believes that CBDCs like the digital yuan are based on the same idea that Tether had when it was creating the first stablecoin eight years ago.
In time, Ardoino believes that CBDCs will replace the SWIFT messaging network, which allows banks around the world to communicate with each other and facilitate cross-border payments. Meanwhile, banks will accept transfers through these digital currencies — and they'll be responsible for settling the majority of credit and debit card transactions, especially at the weekends.
But setting out why private stablecoins continue to have a use case, Ardoino said that CBDCs are probably going to be issued on private blockchains that deliver "modern and cost-controlled tech infrastructure." In other words, they're unlikely to be built on Ethereum. He wrote:
"Tech evolves but nothing actually changes. Only Bitcoin is our edge."
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CBDCs: Pros and Cons
Central bank digital currencies are increasingly becoming a hot-button topic around the world.
Joe Biden's executive order on cryptocurrencies has ordered government departments to work together and decide whether the U.S. Federal Reserve should start developing one of its own.
But it's fair to say that the U.S. is at a disadvantage here, given how Tether has been in operation for years, and China's digital yuan is now being tested by millions of people.
Proponents of CBDCs argue that they could transform the way we all pay our taxes, and receive payments from the government. There's also hope that they could speed up transactions while making them less expensive.
But critics warn that they could deal a blow to the privacy of users around the world — with Beijing openly admitting that it wants to achieve "controllable anonymity" with the digital yuan. Whereas cash can be truly anonymous, it's possible that a person's spending habits using a CBDC could be tracked unless strict safeguards are imposed.
Tether has some pretty big downsides of its own, not least because lingering questions remain over whether all of the USDT in circulation is fully backed by U.S. dollars sitting in a bank account.
