Central bank digital currencies (CBDCs), by and large, have been heralded as having utility across a variety of use cases — from speeding stimulus payments to bringing financial services to the unbanked to easing cross-border B2B payments. Also, of course, for staving off private digital currencies such as Diem and blunting inroads that bitcoin and other cryptos might make in mainstream commerce.
At least some observers are also holding CBDCs as a way to foster and cement regions as financial hubs and centers of innovation.
As Reuters reported earlier this month, CityUnited, a financial think tank, has posited that the U.K. can use the introduction of a digital version of the British pound to boost the region’s financial hub status in the wake of Brexit. As reported, Daniel Hodson told Reuters that the Bank of England’s process of mulling a CBDC should be accelerated.
“The Bank of England is talking about a CBDC but it ought to be a greater priority as this form of technology is the future, and would bring other benefits like real-time regulation to cut costs,” said Hodson. He added that “a central bank digital currency (CBDC) should be a fundamental foundation for a competitive City after Brexit, otherwise China will steal a long march on us.”
As has been widely reported, China has leapfrogged other nations through its own efforts to develop and deploy a digital yuan.
As reported in this space late last month, China has also proposed global rules for how central bank digital currencies (CBDCs) should operate.
People’s Bank of China (PBOC) Director General of the Digital Currency Institute Mu Changchun has said there should be interoperability between CBDC systems of different jurisdictions and exchange. He also said information flow should be “synchronized” in order to allow regulators the ability to monitor the transactions for compliance, Reuters reported. He added there should be a “scalable and overseen foreign exchange platform,” supported by distributed ledger technology (DLT) like blockchain.
The List Grows Longer
The list of countries that are embracing CBDCs — and formulating timelines to issuance — is growing, incrementally.
In one example, Turkey is aiming to launch its own digital version of the Lira within the next two years; Coingape reports that the Central Bank of Turkey and the Financial Department of the President are working on the digital currency.
In early April, the Bank of Japan took its place as one of the latest central banks to to look into creating a central bank digital currency (CBDC). As PYMNTS detailed, the first phase of an experiment began last week and consists of the bank conducting experiments on the basic functions for CBDCs as payment instruments. Those functions span issuance, distribution and redemption. The first phase will reportedly last just under a year, until March 2022. Kazushige Kamiyama, who leads the bank’s payment system department, has noted that there would be “coexistence” between banknotes and digital currency.
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