Above 40 Central Banks Across the Globe will Try Central Bank Digital Currencies
According to a report published by the World Economic Forum, there are more than 40 central banks across the globe that are either trialling or will soon trial with central bank digital currencies (CBDCs). The report was published on Wednesday, 3rd April. As per the report, the central banks are conducting such blockchain pilots as an effort to address issues such as payments efficiency, financial inclusion along with cybersecurity.
Ashley Lannquist, the lead of blockchain and distributed ledger technology at the World Economic Forum stated:
“It’s very much the case that several central banks are looking at this.”
She indicated that the banks are actively experimenting with blockchain technology to issue CBDCs subsequently. She further added,
“Pilot and experimentation work thus far on this subject has yielded some mixed results, some optimistic results, and the summary of where we are right now is that central banks are proceeding with caution, yet highly involved in research.”
Per the report, the improved process of Know Your Customer (KYC) and Anti-Money Laundering (AML), corruption and illicit activities, reduced tax evasion are some of the benefits of CBDC. It will also serve as alternative payments technology over the traditional payment methods to the private sector. Last but not least, CBDCs will enable more cost-efficient and faster peer-to-peer transactions. However, the report also enlisted several lowlights of CBDCs, which are as follows:
Exclusion of users who do not adopt CBDC
All the above potential downside associated with blockchain technology will contribute as challenges to the central banks. For technical and policy issues, central banks are expected to go thoroughly before implementing the technology in real-time operation in order to avoid unintended consequences.
The National Bank of Cambodia is planning to utilize blockchain technology in its national payments system by the end of this year. Whereas on the other hand, The Bank of France replaced the procedure of provisioning and sharing Single Euro Payments Area Credit Identifiers (SCIs) with the blockchain-based system.
CBDC is also dubbed as “Digital Fiat Currency”. It is established by government regulation as a digital form of fiat money. The Bank of England was the first one to introduce the idea of CBDC. However, the central bank of Sweden is closest to implement it in the near future.