Most of us have heard of 'bitcoin' and the rising valuation of bitcoin over time. As of this writing one bitcoin has a 'value' of over $35,000USD. Back in early 2009 the bitcoin when it was introduced, had a valuation of zero.
Crypto. Bitcoin is an 'alternative currency' known as a cryptocurrecy. And there are more places to use bitcoin to pay for goods and services.
As of this writing you can buy a Lamborghini car with your bitcoins. Surprisingly Home Depot and Overstock also will accept bitcoin as payment. However, don't try to use your bitcoin at Amazon or eBay. As yet, they have not accepted the cryptocurrency for payment.
Currently, there are more than ten current cryptocurrency available, besides bitcoin. According to some data, the valuation of cryptocurrency total is $1.45 Trillion.
And yes, trading in crypto can lead to a taxable event, virtual currencies are taxed by the IRS when traded.
Central Bank Digital Currency. And of interest is that the U.S. Government is currently investigating the possibility of creating CBDC - Central Bank Digital Currency. Why would this be different from bitcoin or other forms of digital or cryptocurrency.
Digital Currency. If you think that you do not have any digital currency, well guess again. Currently, banks are the holders of funds in digital currency. Your bank account and credit card payments are forms of digital currency. The ten dollar bill in your pocket, on the other hand, is issued by the U.S. Government and is 'physical' money/funds.
But keep in mind that the paper money issued by our government is "fiat money." * It is not backed by any commodity such as gold, but rather by the perceived strength of the U.S. economy. If any government prints too much fiat money, the value (buying power) of the fiat money can dramatically reduce.
To read more about the U.S.Government and CBDC you can go to https://www.federalreserve.gov/cbdc-faqs.htm
Current CBDC. There are countries that have embraced the Central Bank Digital Currency concept. The Bahamas digital currency is called "Sand Dollar' and Nigeria has the "E-Naira". Other countries like China and Russia are due to release their country's digital currency in the future.
According to the official Bahamas site: "Sand Dollar is the digital version of the Bahamian dollar (B$). Like cash, Sand Dollar is issued by the Central Bank of The Bahamas through authorised financial institutions (AFIs)."
It is beyond the scope of this article to discuss the pros and cons of cryptocurrency, digital forms of currency and CBDC.
It might just be time to learn more about digital currency and how the U.S. intends to further investigate its use in the future through CBDC.
* For an excellent analysis of fiat money, the article "Fiat Money" by James Chen (updated October 26, 2021)
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