How Cryptocurrencies Could Be Beneficial For CBDC And Vice Versa: Industry Executive Explains

Cryptocurrencies like Bitcoin (BTC) could potentially find some mutually beneficial interactions with central bank digital currencies (CBDCs), according to an industry executive.

While cryptocurrencies are often associated with financial freedom, the CBDC concept is often seen as the exact opposite. But that doesn’t mean there can’t be a balance between the two, according to Itai Avneri, chief operating officer and deputy CEO of cryptocurrency trading platform INX.

CBDCs and regulated cryptocurrencies could potentially complement each other in the future as the two types of digital currencies have their advantages, Avneri said in an interview with Cointelegraph on Dec. 22.

Comparing CBDCs to regulated primary offerings, Avneri suggested that allowing or permitting cryptocurrencies to participate in such offerings would be beneficial to both parties. This would specifically expose such financial instruments to a wider audience while also giving crypto investors “comfort and confidence to trade in a regulated environment.”

“In my vision, the CBDC ecosystem will be no different, but we have a long journey ahead of us before we get there,” the INX deputy CEO said, adding that the balance between CBDC and cryptocurrency would be an “artistic master.”

The executive noted that he is not familiar with any current initiatives that would allow a cryptocurrency like Bitcoin to be purchased with a CBDC or other potential CBDC-crypto interactions.

Avneri also stressed the importance of combining regulation and decentralization because full decentralization loses rules like Know Your Customer (KYC) checks, which “come at a price that sometimes isn’t good for investors.” She stated:

“When thinking about working with governments and central banks, I believe clients need to be identified as it will serve their interest and build the necessary trust in the ecosystem.”

Avneri stressed that CBDC users still need to be able to interact privately “similar to how they can use physical cash today.”

The news comes as INX enters a partnership with authentication firm SICPA to help governments develop CBDC ecosystems. As previously reported, INX was the first company to conduct a tokenized initial public offering approved by the US Securities and Exchange Commission in 2021.

Related: Cryptocurrencies could trigger next financial crisis, says head of India’s RBI

The INX Deputy CEO is not alone in thinking that CBDCs and cryptocurrency technology could be mutually beneficial in the future. Thomas Moser, a member of the board of directors of the Swiss National Bank, believes that centralized financial projects such as CBDCs could allow for greater stability in the development of decentralized finance.

Mikkel Morch, executive director of digital asset hedge fund ARK36, also believes CBDCs pose no direct threat to cryptocurrencies like Bitcoin. However, according to Morch, CBDC can bear some risks in relation to stablecoins such as Tether (USDT).