During the digital era, traditional approaches to banking are gradually fading into the background. There has recently been an event in the financial arena that is redefining the concept of money - the emergence of central bank digital currencies (CBDCs). Fintech expert Sergei Kondratenko explains that these digital assets are issued by national banks. They are electronic money that operates in a digital format.

Sergei Kondratenkois a recognized specialist in a wide range of e-commerce services with experience for many years. Now, Sergei is the owner and leader of a group of companies engaged not only in different segments of e-commerce, but also successfully operating in different jurisdictions, represented on all continents of the world. The main goal is to drive new traffic, create and deliver an online experience that will endear users to the brand, and turn visitors into customers while maximizing overall profitability of the online business.

Features of using CBDC: advantages and disadvantages - Sergei Kondratenko

CBDCs are gradually entering global circulation as legal tender. Digital currency provides the ability to transact with the same ease as traditional fiat currencies. Unlike volatile cryptocurrencies, CBDCs come under the auspices of a central bank, which ensures stability and predictability in their use. National digital currency has already been called for in 130 countries around the world. At the same time, some of them have already begun the process of their implementation - Nigeria, the Bahamas, India, Jamaica. Some states are introducing digital currency in test mode - these are Kazakhstan, China, Malaysia, Myanmar, UAE, Russia, Singapore, Saudi Arabia, Thailand, Ukraine, Sweden, South Africa. This global trend underscores the global interest in financial innovation and preparation for a digital future.

Expert Sergei Kondratenko names the main advantages of CBDC:

1. Competitiveness. The introduction of CBDC gives central banks the opportunity to compete with commercial financial institutions. One of the tools is providing loans with lower interest rates.

2. Financial inclusion expands with the ability to use CBDC without necessarily opening a bank account. Thus, digital payments become more accessible to a wide range of the population.

3. Saving the country's budget. Operating costs associated with the circulation of cash, according to open data, amount to 1.7% of the country's GDP. This amount may decrease significantly when switching to digital currency.

4. Control of regulators. The programmability and transparency of CBDCs provide regulators with a more effective tool for oversight. This characteristic contributes to better management of monetary policy.

5. Availability of liquidity for banks 24/7. CBDCs provide continuous access to liquidity for banks, outperforming traditional methods. This improves the efficiency of financial transactions and ensures the stability of the banking system.

Against the backdrop of advantages for the state financial system, Sergei Kondratenko notes that CBDC also entails disadvantages:

• Privacy issues. The implementation of CBDCs may pose a threat to privacy since they allow all transactions to be tracked and controlled. This can lead to abuse of power and invasion of privacy.

• Cybersecurity risks. CBDCs are subject to the threat of hacker attacks, which can lead to the loss of funds and personal information. That is, there is a clear risk to the security of the financial system.

• Violation of the banking system. The ability to conduct peer-to-peer transactions without financial intermediaries could potentially disrupt the traditional banking system.

• Potential for financial instability. The implementation of a CBDC may increase the level of financial instability, especially if coordination with other monetary policies fails.

The future of CBDC: the use of blockchain technologies taking into account restrictions - Sergei Kondratenko

The specialist is confident that for the successful functioning of a CBDC, a reliable digital registry is required. It must ensure data retention, regular backups and protection against changes to previous records. In this context, blockchain protocols inspire confidence, but there are some risks that need to be addressed.

Privacy and transparency.Sergei Kondratenko focuses on the fact that in the case of CBDC it is difficult to imagine the use of public and transparent blockchains. He suggests that this could lead to unwanted tracking of individual users' financial activities. There needs to be a balance between confidentiality and transparency.

Centralized control of CBDC circulation by the central bank.This limits the possibility of decentralization, which is so characteristic of most blockchain systems.

Scalability.The throughput of existing blockchains may not be sufficient to meet the needs of millions of users. Solving this problem requires further developments in the field of expansion and development of blockchain technologies.

Sergei Kondratenko is confident that even taking into account the listed difficulties, CBDC will not refuse to use the achievements of blockchain protocols. For example, the French Societe Generale - Forge and the National Bank of Ukraine have conducted experiments using the Tezos blockchain network as a platform for CBDC. Such efforts indicate a desire to integrate distributed ledgers, heuristic analysis and smart contracts to automate financial processes. It should be noted that the necessary level of control and privacy is maintained. The expert emphasizes that blockchain technologies thus continue to play a key role in shaping the future of digital currencies.

Sergei Kondratenko: How do CBDCs change the state financial system?

Many central banks are actively introducing CBDC into circulation. This technological advancement carries with it the potential to fundamentally transform the banking system.

Sergei Kondratenko calls one of the key advantages of implementing CBDC a reduction in costs and fees for transactions. An important aspect will be the acceleration of the digitalization of the economy, which will allow central banks to more effectively respond to the challenges of the modern world.

CBDC also provides additional tools for shaping fiscal policy and simplifies monetary control. This will open up new opportunities for improving the quality of macroeconomic statistics and, ultimately, strengthen the stability of national banks.

- It is important that the introduction of CBDC will clearly increase the level of financial literacy among the population and intensify the use of digital means. This, in turn, will strengthen national currencies, reduce the dependence of the world economy on the US dollar and stimulate the use of local currencies, says Sergei Kondratenko.

Against the backdrop of global trends, the digital Yuan e.CNY in China is becoming a shining example of innovative technologies in the field of finance. While technical details remain shrouded in secrecy, provinces in China have already begun testing this digital currency. The specialist emphasizes that e.CNY is popular due to the absence of transaction fees and active support from local entrepreneurs.

Sergei Kondratenko draws attention to the fact that the pros and cons of CBDC are not mutually exclusive. Despite the many benefits, there are potential risks and disadvantages that need to be carefully considered. The expert is confident that the success of CBDC will depend on competent development, implementation and integration with existing monetary policies and financial systems.