Several countries have taken concrete steps or announced their intentions to launch a CBDC. As a digital currency, a CBDC’s most obvious benefit is faster, cheaper, and more efficient payments, both domestically and cross-border. In addition, a CBDC also reduces costs of making physical money. Supported with the blockchain technology, a CBDC is more difficult to counterfeit than paper notes and coins. CBDC also makes it easier for government agencies to fight criminal activities such as tax evasion and bribery.
Turkey became one of the latest countries to declare the development of a CBDC. To be completed by the end of 2020 as part of the Annual Presidential Program, the pilot for the digital Lira includes the development of a software platform for instant payment.
This is interesting. Could you please pinpoint the countries which already introduced such currency and how well it is going.
70% of central banks surveyed are engaged in some type of CBDC exploration - France, Singapore, China, Canada, Marshall Islands are some of the countries. Benefits include digital currency could provide a real time picture of economic activity in a country or region as well as provide more accurate and timely economic data for GDP estimates than are available today. Other benefits are fighting money laundering and corruption where the money trail is clearer.
It is still a long way before digital currencies can gain confidence of the policy makers across the global. The risks involved are too high and imaginable as they could have global repercussions to dwarf the 2008 Global Financial Crisis. Facebook was contemplating of introducing Libra (digital currency) in liaison with central banks in Europe and USA but there is substantial resistance such that some critical players have since withdrawn from the project. While banks adhere to Basel II and III Accords to bring sanity to the global industry, there is no such initiative in digital currency and this would make monitoring and regulation of the said industry very difficult to achieve. It will therefore be in the nascent stage up until 2025 that is my guess.
Not immediately under any circumstances..!
First and foremost looking at competencies of many central banks and record of central bank and governors has been questionable. Others which have failed several times, some had incompetent governors-Brazil, Argentina,Ecuador, other certain Asean countries, Japan,Thailand etc so if their decision to issue digital currency to prevent crypto currencies from taking over the banking is absurd. Unless they engage in comprehensive studies of its mining, conversion from conventional currency,and the mechanism that controls its fluctuations the central banking digital coining will just remain like rare stamps in a box.
Again each country has different problems-some unstable currency (Myanmar,Cambodia) some have large hoard of black money (Bangladesh), some issue of counterfeit money (Pakistan), some want to use their currency to colonies their region (China) etc.
Again state of economy differs such as those in emerging economies and those as developed.Finally don't lets forget that if stable coins further back their coins with stronger assets like may be US government bonds then they will still compete with these government cryptos.
I would like to add a last note to think about current profile of these central banks. they never deal directly with citizens-if they issue cryptos, they need to then deal with all citizens using their cryptos which is a huge huge task and could be problematic.
Regarding this topic, the Bank for International Settlements (BIS) published a report about Central Bank Digital Currency (CBDC): https://www.bis.org/publ/bppdf/bispap101.pdf
Dear Colleagues and Friends from RG,
Central banks already use digital currencies in settlement transactions with other financial institutions of specific financial systems, including banking. The importance and share of non-cash settlements carried out not only within the scope of the clearing system has been growing since the 1990s and will continue to grow in subsequent years. The scale of transactions made in a non-cash form will increase. This is due to several determinants. First of all, technological progress in the field of ICT and electronic settlements will facilitate transactions and settlements in electronic form. In addition, electronic settlements are made the fastest and the risk of losing money or theft of physically existing money is avoided. On the other hand, the importance of cyber crime risk management processes, embezzlement carried out by cybercriminals and hackers breaking into transactional electronic banking systems, including online and mobile banking, is growing. however, internet data transfer security systems and electronic banking systems are constantly being improved and cyber crime risk management systems are constantly being improved. In my scientific publications available on the Research Gate portal, I described the importance of central banking in the context of effective development of banking systems and the genesis of the global financial crisis of 2008, as well as security issues of data transfer in Internet and selected key aspects of cybercrime in the field of electronic online banking.
Do you agree with me on the above matter?
Please reply.
I invite you to discussion and scientific cooperation.
Thank you very much.
Best wishes.
Dariusz Prokopowicz
Dear Rajko Sekulovic,
According to me, digital currency is the demand of the day. If implemented with enough cyber security mechanisms, then it can help in a great way to the governments as well as the customers like us. Along with cyber safety measures, proper training and awareness campaign must be required in the under-developed and developing countries for the successful implementation of the CBDC.
With best wishes,
To the extent that central banks manage bank reserves in digital ledgers they all already have "digital currencies." To the extent that they allow commercial banks to offer to the public accounts which are credited and debited by electronic transactions, the public also already have access to "digital currencies" in the regular banking system under the oversight of central banks. To the extent that money holders see an advantage in the supply of cryptocurrencies being detached from political manipulation, for a central bank to offer a crypto-currency would defeat that purpose. So, the question of whether a central bank should consider issuing its own "digital currency" may be rephrase as a question of whether a central bank should offer directly to the public the electronic settlement of their accounts in the digital ledgers of the central bank and not indirectly through the settlement of bank reserves of the commercial banks. The way I see it, the proposal for central banks to issue their own digital currency is an attempt to eliminate commercial bank intermediation. That would have important consequences for the most efficient allocation of capital in the economy, with further political allocation of credit. If central banks start offering bank account to the public directly, those liabilities will fund assets that the central bank will chose, most likely, public debt, and alternatively, whatever lending the central bankers decide to engage. With that, the supply of commercial credit will suffer, by the reduction of market allocation of credit in the economy.
I think that back to some implications and conditions like:
1- The technological infrastructure of the country.
2- The control instrumanents that managed by CB.
3- whether the country depending on Export or manufacturing in toatal.
4- People adaptication to he new payment system.
very true Mr Felix And as my comments made at start of the discussions.
The question is very clear and narrow in scope in that it asks specifically about release of a new digital currency by a Central bank as a substitute to other crypto currencies in the market in addition to the official paper currency already in circulation by them.
The scope of the discussion I sincerely believe doesn’t include digital ledgers and important to note that BIS head Mr Boreo talks about soon to be issued CBDC for retail by around 10% of CB’ s (Central Banks).
In my opinion that any currency in which there is no legal and intangible cover will expose those who possess it to a high risk because it is recognized that something is subject to a legal procedure for its acquisition, whether it is a property or a security, so this currency I think will not be preferred at the future level and is present for the current period.
You may be interested in this article on Central Bank Digital Currency (CBDC) and Central Bank Cryptocurrency. Published in the Federal Reserve Bank of St. Louis Review.
Article The Case for Central Bank Electronic Money and the Non-case ...
The current collapse of the financial system will be the event for the legitimation and creation of CBDCs.
I think the strongest benefit and reason, for any kind of CBDC, to a central bank is the strong transmission mechanism of monetary policy. Monetary policy impulses are transmitted via individual transmission channels, giving the central bank (the state) more influence on interest rates, credit and wealth.
I do not subscribe to this view. All technology interventions have serious limitations in regulation and prone to more risks. For example, the tick up in frauds of hug order across ranks in Indian Banks defying even punitive measures well in time is a point . Let us not move to digital currencies that would leave the entire monetary system in the globe fully out of gear.
Dear Rajko,
I believe that we will see a rapid rise in CBDCs.
Please refer to these papers, I hope they help.
Kind regards,
Article Exploratory Analysis of Blockchain Application in Trade Finance
Article Impact of Blockchain Technology on the Payment Management Sy...
Digitization facilitated fraudsters to rob the stakeholders investment. Once digital currency gets in it may facilitate day light burglary legally.
In the times of pandemic, introducing digital currencies sounds like a good idea!
In my country, we do not use digital currency so we do not have information about digital currency.
Hi! Here are some articles that already give some ideas related to your question:
Fernández-Villaverde, J., Sanches, D., Schilling, L., & Uhlig, H. (2020). Central Bank Digital Currency: Central Banking For All? (No. w26753). National Bureau of Economic Research.
Fern, J., Sanches, D. R., Schilling, L., & Uhlig, H. (2020). Central Bank Digital Currency: Central Banking For All? (No. 2020-04).
Asadi, S. P. (2020). Central Bank Digital Currency and the Future of Commercial Banking. Available at SSRN 3542664.
"We should be prepared to issue a digital euro, should the need arise.”
Christine Lagarde, President of the ECB
You may like to read: https://justmoney.org/l-zelmanovitz-and-b-meyerhof-salama-central-bank-digital-currency-the-hidden-agenda/
Dear Mr. Leonidas Zelmanovitz thank you for this valuable and very fresh reference!
Some interesting examples of CDBSs (investopedia.com):
To date, no country has officially launched a central bank-backed digital currency. Many central banks, however, have launched pilot programs and research projects aimed at determining a CBDC's viability and usability.
The Bank of England (BOE) was the pioneer to initiate the CBDC proposal. Following that, central banks of other nations, like China’s People’s Bank of China (PBoC), Bank of Canada (BoC), and central banks of Uruguay, Thailand, Venezuela, Sweden, and Singapore, among others, are looking into the possibility of introducing a central bank-issued digital currency.
Russia has been moving forward with its creation of the "crypto-ruble," announced in 2017. Venezuela has been purported to be working on a CBDC called the "petro" since 2017, which would be backed by physical stocks of crude oil. The Venezuelan government also announced "petro gold" in 2018, allegedly pegged to the value of oil, gold, and other precious metal.
Fresh article about CDBC: https://www-coindesk-com.cdn.ampproject.org/c/s/www.coindesk.com/money-game-central-banks-cbdc?amp=1
The introduction of central bank digital currencies would facilitate the many types of transactions in which central banks participate. The process of digitization and internationalization of economic processes, including payments and settlements as well as the execution of financial transactions, has accelerated in recent years. The SARS-CoV-2 (Covid-19) coronavirus pandemic additionally accelerated these processes. Central banks already carry out a large part of their operations mainly or exclusively electronically. First of all, in the field of settlements under the system of mutual interbank settlements, clearing settlements carried out between commercial banks, where balancing takes place as part of the re-accounting of the amounts of differences in clearing transactions on specially created accounts of commercial banks at the central bank, etc., cashless transactions already dominate, implemented electronically.
Best wishes,
Dariusz Prokopowicz
The euro belongs to Europeans and we are its guardian. We should be prepared to issue a digital euro, should the need arise.
Christine Lagarde, President of the ECB
https://www.ecb.europa.eu/euro/html/digitaleuro.en.html
It is now just question of time when digital currencies issued by central banks are going to prevail over cash and credit cards. That's the future and not far from today. It's in the testing or even pilot phase...
Is it not true that most CBDC would not use blockchain as in Bitcoin. The
crypto techniques of course are used. Distributed blockchain would only
get in the way of transaction speed etc.
Honestly, I thought this was like soda bubbles, just herding behind masses and technology masters. I think the answer came from China's central bank abandoning the cryptocurrency, whatever it was.
CBDC is going to be a wel laid trap to the citizens in this era of growing cyber crimes.
Bad idea, this would be a big step towards an ultimate control over the citizens and a perfect tool for totalitarian regimes.
https://justmoney.org/l-zelmanovitz-and-b-meyerhof-salama-central-bank-digital-currency-the-hidden-agenda/
Several emerging economies and even developed economies are experimenting with digital currency. We see the phenomenal surge in cyber crimes and when currencies go digital, they tend to be non-transparent and put a big hole in the pockets of gullible citizens who are larger than the rich and digitally literate persons having the skills or ability to deal with CBDT. I am not inclined to support the introduction for at least the next five years. At the end of five years, a few studies across different demographic and ethnic regions should be conducted to consider such initiative.