English Learning: Digital Currencies Backed by Governments

Dialogue

Current Situation

Digital Currencies Backed by Governments, more formally known as Central Bank Digital Currencies (CBDCs), represent a significant shift in the financial landscape. Unlike decentralized cryptocurrencies such as Bitcoin, CBDCs are digital forms of a country’s fiat currency, issued and backed by its central bank. This means they are a direct liability of the central bank, just like physical banknotes.

Several motivations drive governments and central banks to explore CBDCs. These include enhancing payment system efficiency, reducing transaction costs, promoting financial inclusion for unbanked populations, providing a stable digital alternative to volatile private cryptocurrencies, and enabling more effective monetary policy implementation. For instance, instant payments and programmability could revolutionize how financial aid is distributed or how taxes are collected.

Globally, the development of CBDCs is in various stages. The Bahamas launched the “Sand Dollar” in 2020, making it one of the first countries with a live CBDC. Nigeria followed with the “eNaira.” China has been extensively piloting its Digital Currency Electronic Payment (DCEP), or e-CNY, for several years. Many other major economies, including the Eurozone, the UK, and the US, are conducting research, experiments, and public consultations on the potential design and implications of a digital euro, digital pound, or digital dollar, respectively.

However, the implementation of CBDCs also raises considerable debate and concerns. Key issues include privacy (as transactions could be traceable by the central bank), potential risks to commercial banks (as people might shift funds from bank deposits to CBDC accounts), and the possibility of increased government control over individual spending. The balance between innovation, stability, privacy, and public trust remains a central challenge for policymakers.

Key Phrases

• keeping an eye on: to be watching something carefully or paying attention to it.
  • Example: “The police are keeping an eye on the suspect’s house.”
• backed by governments: supported or guaranteed by official government authority.
  • Example: “These bonds are a safe investment because they are backed by governments.”
• central bank: a national bank that provides financial and banking services for its country’s government and commercial banking system, as well as implementing the country’s monetary policy.
  • Example: “The central bank decided to raise interest rates to control inflation.”
• government plot: a secret plan by a government, often implying something negative or conspiratorial.
  • Example: “Some people believe the new policy is a government plot to reduce personal freedoms.”
• financial inclusion: the process of making financial services accessible and affordable to all individuals and businesses, regardless of their personal net worth or company size.
  • Example: “Microfinance initiatives aim to promote financial inclusion in developing countries.”
• privacy concerns: worries or anxieties about the protection of personal information and data.
  • Example: “Many users expressed privacy concerns about the new social media platform’s data collection policy.”
• track every purchase: to monitor and record every item or service someone buys.
  • Example: “With a digital ledger, it would be possible to track every purchase made by citizens.”
• cashless society: a society in which financial transactions are conducted primarily through electronic transfers rather than with physical banknotes or coins.
  • Example: “Sweden is rapidly moving towards becoming a cashless society.”
• leap into the future: a significant and sudden advancement or progression.
  • Example: “Developing artificial intelligence represents a huge leap into the future for technology.”
• trade-off: a situation in which you must choose between two things, or in which you must lose one in order to gain another.
  • Example: “There’s always a trade-off between quality and cost when buying products.”

Grammar Points

• Present Continuous for Ongoing Trends and Future Plans:

  The present continuous tense (subject + am/is/are + verb-ing) is often used to describe actions that are happening now, but it’s also very common to describe ongoing trends, developing situations, or even future plans/arrangements.

  • Example from dialogue: “Have you been keeping an eye on all this talk…?” (Ongoing action/attention)
  • Example from dialogue: “Some countries are already piloting them.” (Ongoing development)
  • Example from dialogue: “So, we’re basically heading towards a cashless society…” (Ongoing trend/direction)
  • Explanation: This usage highlights that the situation is dynamic and evolving, not static.

• Modal Verbs for Possibility and Speculation:

  Modal verbs like might, could, and would are used to express possibility, probability, or hypothetical situations.

  • Might/Could: Indicate a weaker possibility or suggestion.
    • Example from dialogue: “My grandma thinks it’s a government plot to know how much ice cream she buys.” (Bob is speculating about his grandma’s belief)
    • Example from dialogue: “Maybe they’ll send you an automated health notification…” (Alice is speculating about a future possibility)
    • Example from dialogue: “could help with financial inclusion” (Suggestion of potential benefit)
  • Would: Often used in conditional sentences to talk about hypothetical outcomes or what will happen in a specific (often imagined) scenario.
    • Example from dialogue: “this would essentially be digital cash.” (Hypothetical definition)
    • Example from dialogue: “couldn’t they track every single purchase?” (Hypothetical consequence)
  • Explanation: These verbs help speakers discuss scenarios that aren’t certain but are being considered or imagined.

• Phrasal Verbs:

  Phrasal verbs are combinations of a verb and a preposition or adverb (or both) that, when combined, create a new meaning often different from the original verb.

  • Keep an eye on: (Dialogue) to watch carefully; to pay attention to.
    • Example: “Could you keep an eye on my bag while I go to the restroom?”
  • Head towards: (Dialogue) to move or progress in a particular direction or state.
    • Example: “The economy is heading towards a recovery.”
  • Fumble for: (Dialogue) to try to find something, especially with your hands in a clumsy way.
    • Example: “He fumbled for his keys in the dark.”
  • Explanation: Phrasal verbs are very common in informal and conversational English and are essential for natural communication.

Practice Exercises

Exercise 1: Vocabulary Match

Match the key phrase on the left with its definition on the right.

1. Keeping an eye on a. A secret plan by a government
2. Backed by governments b. A significant and sudden advancement
3. Central bank c. To monitor every purchase
4. Government plot d. Supported by official government authority
5. Financial inclusion e. To be watching something carefully
6. Privacy concerns f. Making financial services accessible to all
7. Track every purchase g. A national bank
8. Cashless society h. Worries about personal data protection
9. Leap into the future i. Society without physical money

Exercise 2: Sentence Completion

Complete the sentences using the appropriate key phrase from the list below. Some phrases may be used more than once or not at all.

• backed by governments
• financial inclusion
• cashless society
• privacy concerns
• leap into the future
• keeping an eye on
• track every purchase
• central bank

1. Many economists believe that a truly ______________ is inevitable in some countries.
2. The new digital currency will be ______________, ensuring its stability.
3. Are you ______________ the news about the new policy proposals?
4. One of the main goals of the initiative is to improve ______________ for underserved communities.
5. A major debate around CBDCs revolves around ______________ and the ability to ______________.
6. The decision to lower interest rates came directly from the ______________.
7. The discovery of gravity was a huge ______________ for physics.

Exercise 3: Grammar Focus – Modal Verbs

Rewrite the following sentences using a modal verb (might, could, or would) to express possibility, suggestion, or hypothetical outcomes.

1. Perhaps the new system will be more efficient.
   → The new system ____________________ more efficient.
2. It’s possible that they will introduce a digital currency next year.
   → They ____________________ a digital currency next year.
3. If we didn’t have cash, transactions would essentially be entirely digital.
   → Without cash, transactions ____________________ entirely digital.
4. It’s a possibility that this policy helps reduce crime.
   → This policy ____________________ reduce crime.

Exercise 4: True or False (Based on “Current Situation”)

Read the “Current Situation” section and determine if the following statements are True or False.

1. CBDCs are decentralized, similar to Bitcoin. (T/F)
2. The Bahamas was one of the first countries to launch a live CBDC. (T/F)
3. CBDCs are expected to only benefit developed countries. (T/F)
4. One concern about CBDCs is their potential impact on individual privacy. (T/F)
5. Physical banknotes will likely be completely abolished immediately upon CBDC implementation. (T/F)