Central Bank Digital Currencies and Real Estate Tokenization

05/06/2022

If countries implement Digital Central Banks (CBDCs), assets will be exchanged through cryptocurrencies. Let’s talk about the relationship between CBDC and real estate cryptography with Moonka.

What is CBDC?

CBDC stands for Central Bank Digital Currencies which is a National Bank Digital Currency. Physical currency is still widely exchanged and accepted; however, some developed countries have significantly reduced its use, and that trend has accelerated during the COVID-19 pandemic. The advent and development of cryptocurrencies and blockchain technology have created a surge in popularity. more interest in cashless societies and digital currencies. As a result, governments and central banks around the world are exploring the possibility of using government-backed digital currencies.

The primary goal of CBDC is to provide businesses and consumers with privacy, transferability, convenience, accessibility, and financial security.

The introduction of CBDC will boost demand for crypto real estate

In the traditional form of buying or investing in real estate, there are often cumbersome and time-consuming procedures. Through the internet, online notary services appear to save time for real estate transactions. High-value assets like real estate are also encrypted on the Blockchain for easy liquidity. Therefore, the audience to access the property will be wider and more diverse. As countries implement CBDCs, demand for cryptocurrencies will drive demand for digital asset transactions. Here are a few benefits of CBDC being launched.

Payment safety and efficiency

CBDC is the authority that issues cryptocurrency and ensures the safety and security of payment methods. At this point, the transactions are transparent and the real estate agent will use the money from the CBDC. In theory, CBDC money has the same value as paper or physical money. But this form of payment is done through Blockchain. With internet coverage, digital assets can become more liquid.

Like cash, CBDCs will be directly responsible for the issuance of coins and will allow households and businesses to access digital currency in a way that is generally free of credit and liquidity risk.

Besides, CBDC promotes an online industry. When not only real estate is encrypted but many other products are also encrypted on Blockchain. At that time, the trend of cashless payment was pursued by many developed countries. It’s convenient to shop through just one mobile device. Users also easily access and manage personal assets.

Expansion of financial inclusion

One of the most important advantages that CBDCs will bring directly lies in the expansion of financial inclusion. Even today, a large portion of the world’s population cannot access financial services. The example of remote areas in the developing world clearly shows the limitations in accessing bank accounts. Many banks are not eager to reach such areas with their services. In such cases, CBDC specialists can ensure easy access to the financial system at a low cost and ensure better efficiency.

The low-cost payment system facilitates the transfer of funds between individuals and customers for business through smartphones without holding a bank account. The benefits of CBDC can ensure that people can experience new perspectives in accessing financial services.

Better efficiency in the payment system

The next significant advantage associated with central bank digital currencies is the improvement in the safety and efficiency of the retail system as well as large-value payments. In the case of retail payments, the benefit of CBDCs emphasizes improving the efficiency of payment fulfillment processes.

Examples of online, peer-to-peer (P2P), and point of sale (POS) payment systems are some examples of payment systems that can be converted through CBDC. The interest in central bank digital currencies in wholesale or high-value payment systems is also attracting attention. CBDCs can enable faster payments in high-value payment systems along with longer settlement times.

CBDCs can also aid in the exclusion of low-value coins by offering crypto-currencies. For example, the Bank of Korea introduced a coinless social experiment in April 2017. The proposal allows customers to deposit their changes to a prepaid card instead of accepting minor modifications. when making a purchase. The significant savings for the country amounted to almost 36.7 million Euros (coin minting costs in 2016).

Faster and better cross-border payments

According to a study conducted in collaboration with the Central Banks of Canada, Singapore, and the United Kingdom, CBDCs have the potential to improve counterparty credit risk in the market, payments cases, and payments between banks. The advantage of wholesale trade centers is evident in the case of financial institutions and markets. Interestingly, wholesale CBDC specialists can provide the ideal answer to the cross-border payment alternative. The advantages of wholesale CBDCs for cross-border payments include,
Wholesale CBDCs tailored to a specific jurisdiction are not eligible for cross-border exchanges that offer limited benefits.

In contrast, a wholesale CBDC for a specific jurisdiction eligible for cross-border exchange can enhance counterparty credit along with settlement and settlement risk.

Another alternative, i.e. a globally accepted single exchange CBDC, could also contribute to improved counterparty credit as well as settlement and settlement risks.

Relationship between CBDC and real estate tokenization

In this relationship, the CBDC is the place that provides a payment method that makes it easy for investors to participate in the exchange of goods. Although, tokenized real assets can be exchanged via private cryptocurrencies like Bitcoin, Ethereum, etc., or stablecoins like USDT, USDC, BUSD, etc. But if these assets are exchanged from cryptocurrencies private sector, it is difficult for the government to monitor and benefit from them.
A country that intends to develop a CBDC will allow Blockchain businesses to apply for a license to operate in the country. This may seem obvious, but this is the way to increase the economic power of that country. Sometimes, many Blockchain businesses just want to pay taxes to the host country instead of the country where the license is registered.
The third reason, real estate is a high-value asset and often has difficult liquidity. Therefore, cryptocurrency from CBDC can promote cross-local, cross-border payments. Expanding the scope of business will help to have more potential customers. Many customers can use funds issued from the CBDC instead of through the bank. Because they are more transparent, traceable, and secure. At this point, the statement is also easier.

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