Central bank digital currencies (CBDCs) work well with Decentralized Finance (DeFi) and have a lot of potential to promote wider adoption of DeFi. According to Swiss Central Bank officials
Thomas Moser, a board member of the Swiss National Bank (SNB), said that among many cryptocurrencies, with CBDC, it can offer more stability and reduce the risk of developing DeFi.
“In order to continue to grow, DeFi needs stablecoins, which is why stablecoins were invented, and stablecoins helped DeFi become more popular,” Moser said.
“Despite the extreme opposites But centralized and decentralized systems in cryptocurrencies can actually work together. Because centralized systems are not bad for DeFi,” Moser argued, noting that major stablecoins such as Tether (USDT) and USD Coin (USDC) are among the most widely used stablecoins in DeFi, both of which are. It is centralized as well.
“So ‘something centralized’ has helped DeFi quite a lot,” the official said.
But with CBDC, it poses a lower risk than other stablecoins for DeFi because of the central bank currency. “It does not pose a counterparty risk,” Moser said. “The central bank cannot go bankrupt. because it issued non-refundable money,” he added.
Other types of digital currencies, including cryptocurrencies such as Bitcoin (BTC) or Ether (ETH), are not redeemable. This means there is no counterparty risk. However, their prices are not stable enough to sustain DeFi growth.
Cypherum CEO Sky Guo expressed confidence that the combination of DeFi and CBDC technologies was “destined to happen”, saying:
“DeFi is completely automated. And it can free CBDC from human limits. With the CBDC used in DeFi, we can expect hundreds of trillions of dollars in liquidity to enter the market. by large institutions entering this area and real-world assets that move on the network.”
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