Stay up-to-date withflow newsbites>
Choose your preferred banking topics and we will send you updated emails based on your selection
Reports suggest that in early 2020, at least 18 central banks worldwide were developing digital currencies. The ECB Working Paper No. 2351, Tiered CBDC and the Financial System, suggests that central bank digital currencies (CBDCs) could offer value as a means of processing fast and efficient retail payments, particularly if cash usage continues to decline. However, it also examines the risk of structural disintermediation of banks and centralisation of the credit allocation process within the central bank, as well as the risk of facilitating systemic runs on banks in a crisis situation.3
On 21 January 2020, the ECB, with the Bank of Canada, the Bank of England, the Bank of Japan, the Sveriges Riksbank, the Swiss National Bank and the Bank for International Settlements (BIS), launched a group to assess the potential cases for CBDCs in home jurisdictions. The review includes CBDC use cases; economic, functional and technical design choices, including crossborder interoperability; and knowledge sharing on emerging technologies.4
The People’s Bank of China has, according to the Financial Times (12 February 2020), filed more than 80 patents related to plans to digitise the renminbi. These include “proposals related to the issuance and supply of a central bank digital currency, a system for interbank settlements that uses the currency, and the integration of digital currency wallets into existing retail bank accounts”.5
Facebook is reportedly rethinking plans for its Libra cryptocurrency. The social media giant’s initial targeted launch of late 2020 became questionable when Vodafone
announced its withdrawal from the project in January 2020, citing redirection of efforts towards its own mobile money payments service, M-Pesa, to promote financial inclusion.6 Libra also still faces regulatory obstacles from government agencies worldwide.