Exploring the Relationship Between Cryptocurrency and Central Bank Digital Currencies


The potential intersect between cryptocurrency and central bank digital currencies (CBDCs) has gained attention from industry experts, with one executive suggesting that the two could find mutual benefits from the relationship.

Itai Avneri, COO and deputy chief executive officer of INX, a cryptocurrency trading platform, discussed the idea of allowing crypto funds to participate in primary CBDC offerings, which would expand access to a wider audience and permit crypto investors to gain exposure to the new asset class. In an interview with Cointelegraph on Dec. 22, Avneri said:

“In my vision, the CBDC ecosystem will be no different, but we have a long journey ahead of us until we get there. Balancing CBDCs and cryptocurrencies is an art that we need to teach.”

The possibility of buying a cryptocurrency like Bitcoin with a CBDC or other potential forms of interaction between the two asset classes has yet to be explored. Avneri highlighted the importance of combining regulation and decentralization, arguing that full decentralization would lead to the loss of important checks such as Know Your Customer (KYC). He continued:

“When you think of working with central banks and governments, you must identify your clients. This will help them to be successful and create trust in the ecosystem.”

Avneri emphasized that users of CBDCs must still have the option of interacting privately, similarly to how physical cash is used today. His comments come as INX partners with Swiss authentication firm SICPA to help governments develop CBDC ecosystems. Meanwhile, Thomas Moser of the Swiss National Bank has argued that centralized finance projects such as CBDCs could provide more stability for decentralized finance.

Mikkel Morch, CEO of digital asset hedge fund ARK36, believes that CBDCs do not present a direct threat to cryptocurrencies such as Bitcoin, although they could take some of the risks relative to stablecoins like Tether (USDT).