# From Bitcoin to Central Bank Digital Currencies: Making Sense of the Digital Money Revolution
## 2 From Bitcoin to Central Bank Digital Currencies (CBDCs)
Twenty-four hours after [PERSON]'s message, Bitcoin was down more than 10%, wiping off 290 billion USD of its market capitalization [38]. Bitcoin's pseudonymity (i.e., the identification of users by an address such as 1 BVbMSEYstWetQTFn5 Au4m4 GFg7 xJaNVN2 that bears no link to a natural identity) has been a source of concern for authorities, as it facilitates illegal activities, such as financing terrorism [39], the drug trade [40], or money laundering [41]. In fact, this might be a massive problem, as pointed out by, for instance, [PERSON] and colleagues [42], who estimate that around one-quarter of Bitcoin users and one-half of Bitcoin transactions are associated with illegal activities, involving about 72 billion USD per year. Nevertheless, the advantages and convenience of Bitcoin have not gone unnoticed, so authorities have been studying the phenomenon and possible adaptations for use in the context of the traditional activities of central banks. The Committee on Payments and Market Infrastructures (CPMI) of the BIS issued a report on digital currencies, with an emphasis on decentralized variants, discussing their impacts on various aspects of financial markets and the wider economy, and possible implications of interest to central banks of such innovations [43]. The main impediment to use Bitcoin as a medium of payment comes from its hyper volatility. Second-generation cryptocurrencies, generally called stablecoins, address this issue by pegging their price to fiat money, exchange-traded assets, or even other cryptocurrencies. The Libra project, announced on 18 June 2019, by a consortium led by Facebook, proposes such a stablecoin. Given the size of the Facebook user-base and the relevance of other founding members of the Libra Association, this new stablecoin promised to become a major player in the worldwide payment system, with a relative loss of importance of traditional national banking systems [44] and might undermine the effectiveness of central bank monetary policy [45; 46]. In fact, the risks associated with the Libra project are systemic, surpass its monetary dimension, and may have global repercussions. [PERSON] and [PERSON] [47] show that these risks may be (a) financial (for instance, as argued by [PERSON] and colleagues [44], a collective loss of confidence in the Libra might lead to negative dynamics, similar to a \"too-big-to fail\" bank run), (b) economic (for instance, the creation of a private oligopolistic payment system or taxation difficulties), (c) technological (for instance, cyberattacks, fraud, or even the failure of the Libra protocol), (d) political (Libra may have a large influence on the global financial system), and even (e) ethic and regulatory (for instance, the possibility of Libra having control over a large part of the world population, which raises concerns on privacy and data property issues). The fallout associated with these concerns has hindered the rollout of Libra, leading to delays and a rebrand, with the project and cryptocurrency now called Diem [48]. In fact, a public consultation by the European Central Bank about the digital euro [49] revealed that privacy was the highest-ranking concern among participants (about 43%), but with safeguards to prevent illegal activities. Security and usability also made the top list. Other authors point to security and control of monetary policy as concerns of governments when introducing CBDCs, together with \"greater financial inclusion, reducing tax fraud, achieving greater control over money laundering\" [50] (p. 1). CBDCs are defined as \"(... ) new variants of central bank money different from physical cash or central bank reserve/settlement accounts\" [9] (p. 1).