The co-founder of COTI believes the controversy surrounding central bank digital currencies will subside as major financial players adopt the technology and optimal designs are established. The co-founder however downplayed the possibility that central bank digital currencies will be built to interface with decentralized finance protocols or Web3 ecosystems.
Privacy Crucial for CBDC Implementation
Shahaf Bar-Geffen, co-founder of COTI, a blockchain technology company, believes that the current controversy surrounding Central Bank Digital Currencies (CBDCs) will diminish as major financial players embrace the technology and optimal designs are established. Bar-Geffen, a seasoned technology entrepreneur, made these comments in response to questions about the contrasting global approaches to CBDCs, with some nations embracing them and others, like the United States, expressing staunch opposition.
In making the case for CBDCs, Bar-Geffen emphasized the potential benefits, highlighting their ability to provide citizens with fast, low-friction cross-border payments, modernizing financial services to align with contemporary needs.
“CBDCs give issuers—central banks and governments—a way to offer their citizens fast, low-friction cross-border payments, modernizing financial services and making them fit for the times we are living in,” he said.
He further pointed out that privacy is a crucial aspect of CBDC implementation, citing COTI’s work with the Bank of Israel to safeguard user data. “The COTI team worked with the Bank of Israel on exactly this solution last year, as part of the Digital Shekel challenge, with the remit to integrate COTI’s privacy solution to protect users. This is a must in any CBDC.”
While some countries are actively exploring and implementing CBDCs, others, including the U.S. government, have expressed reservations. The Trump administration even went as far as issuing an executive order that effectively banned federal agencies from creating any CBDCs.
However, Bar-Geffen attributes the apparent slow implementation in traditional financial institutions to the inherent challenges of large-scale technological transitions.
“Many CBDC projects are still in the R&D phase, though, since traditional financial institutions, like banks, require time to implement changes of this magnitude. However, the ECB has signaled that its testing phase is coming to an end, declaring that it will launch its CBDC by the end of the year,” he added.
CBDCs to Compete With Stablecoins
Many governments and central banks often cite financial inclusion or payment efficiency as reasons for seeking to launch their respective CBDCs. Some experts, however, believe the actual goal of these CBDCs is to counter the rise of decentralized cryptocurrencies like Bitcoin ( BTC).
In his written responses to questions from Bitcoin.com News, Bar-Geffen points to attributes such as a fixed supply of tokens in circulation and a high level of decentralization as distinguishing CBDCs from cryptocurrencies. Nevertheless, he concedes that CBDCs are likely to pose a challenge to stablecoins.
“CBDCs aren’t designed to compete with that [cryptocurrencies like BTC]. They may compete more successfully with stablecoins,” Bar-Geffen emphasized.
He downplayed the possibility that CBDCs will be built to interface with decentralized finance (DeFi) protocols or Web3 ecosystems, suggesting that stablecoins will likely continue serving as the bridge between fiat and crypto worlds.
The co-founder also rejects claims by some of the most vocal cryptocurrency proponents that governments adopting the technology are doing so to take control of the crypto industry.
Regarding the Africa Tokenization Council recently launched by COTI, Bar-Geffen said its goal is to accelerate blockchain adoption in Africa and the Middle East by uniting regional authorities with global blockchain experts. This strategic collaboration, he argues, seeks to streamline decision-making, secure funding, and rapidly implement blockchain solutions.
Meanwhile, Bar-Geffen suggested the prospects of CBDCs being widely used in a few years depend on the background work currently underway.
“In five years, CBDCs will likely be widely used, at least in certain areas of the world, and the risks and benefits they offer will depend largely on the work being done now by organizations like COTI. We’re not sleeping on this opportunity,” Bar-Geffen said.
