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Central bankers split on CBDC future

The debate over the value of CBDCs continues to simmer, with central bankers on either side of the pond weighing in with very different opinions.

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Central bankers split on CBDC future

Editorial

This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community.

More than half of the world's central banks are actively exploring CBDCs, while some, most notably China's, are well on the way to a full launch.

In a speech this week, Bank of England Deputy Governor Jon Cunliffe gave one of the strongest hints yet that the UK is on its way towards some form of Britcoin.

"We may not be there yet, but it looks probable in this country that if we want to retain public money capable of general use, and available to all citizens, the state will need to issue, public digital money," Cunliffe told his audience.

In contrast, Boston Federal Reserve president Eric Rosengren has offered up his own, less enthusiastic, views on the subject of a digital dollar.

"It is important to understand what problems a central bank digital currency is being designed to solve, and whether other technologies could more cheaply or efficiently address those problems," said Rosengren at a virtual event this week.

Rosengren highlighted familiar potential upsides to CBDCs, including more financial inclusion and cheaper cross-border payments, but also stressed the risks to financial stability.

Despite the misgivings, Rosengren's Boston Fed is working with the Massachusetts Institute of Technology to develop a "hypothetical" digital currency platform.

Meanwhile in the UK, the Bank of England and UK Treasury recently launched a fintech taskforce to coordinate exploratory work on a potential CBDC.

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Comments: (4)

Christopher Williams

Christopher Williams Chairman at RTpay

All central banks can talk about CBDCs, but the timeframe for development is the critical factor. USA, UK and EU will be multiple years, minimum five and more like ten, before their CBs are ready, so somewhat irrelevant in a fast-moving market. 

Developing countries will hopefully be far quicker, if they are to keep their fiat currencies as the main money supply in their countries. There we may be talking about a few months if they are to succeed.

John Schlesinger

John Schlesinger Chief Enterprise Architect at Temenos

This is about widely available digital cash, it is not about wholesale and it is not about bank accounts. m-pesa in Africa, predominantly Kenya, is account based mobile money. The digital cash will only replace physical cash if it is anonymous and if it can be used offline with immediate finality. So forget blockchain based payments fo any large country, clearing cannot be on a blockchain, though minting and settlement could be. As this has to include the unbanked, forget KYC and AML. This means there will have to be caps on the size of payment and balances in wallets.  

Andrew Smith

Andrew Smith Founding CTO at RTGS & ClearBank

There are very specific use cases that can solve big global financial challenges which each jurisdiction should be looking at as a matter of urgency. The challenge here is that typically, we get caught up into discussions of use cases that dont really add value - rather they re-implement / engineer the wheel. Challenges such as financial inclusion are nothing to do with CBDCs, likewise, access to immediate payments - again nothing that CBDC adds value here...

John Schlesinger

John Schlesinger Chief Enterprise Architect at Temenos

Good points Andrew. On replacing physical cash with digital cash, clearly it doesn't solve financial inclusion but it can make it worse if you require KYC, AML and a bank account.

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