Central Bank Digital Currency (CBDC) is the digitized version of money from the central bank that offers those same banks unique superiority at retail and wholesale levels. This includes increased financial liberty to individual customers along with enhanced infrastructure efficiency in interbank settlements
Adoption of CBDC will entail considerable implications for both commercial and retail banks. The same banks that are directly participating in monetary systems through accounts maintained at central banks. The said implications will vary depending on CBDC implementations and the regulatory environment of the issuing central bank.
Retail CBDC systems, will impact a given economy in a broader way in terms of non-bank participants having direct interactions with central banks. This is contrary to the wholesale systems where strictly chartered institutions continue to engage with the central banks
A wholesale CBDC model may be more readily adopted than its retail counterparts. The former will witness the underpinnings of the existing currency transfer between the central bank and its account holders, transformed into a distributed ledger. For banks holding accounts with the central banks, this move presents major implications on the way they interact and transact with the central bank and its peers.
CBDC system’s early pilots have flashed potential to optimize the transparency and efficiency of central banks in the distribution of capital based on monetary policy decisions. The requirement has turned to be a key driver during the pandemic phase wherein the demand to distribute economic stimulus equitably sent the legislation to be presented in Congress. Additionally, CBDC systems reserve the potential to empower central banks to use near-realtime data over capital flows inside a monetary to push for better policy-making.
The research endeavor and resultant analysis across central banks, worldwide, established that CDBCs are indeed getting over the hype and headed straight into production. Over the following 6-12 months we expect to witness the occurrence of these events, at a calculated pace with certain acceleration through competitive pressures and the evolution of the CBDC technology ecosystem.
First movers included Bahamas, China, Cambodia, and Sweden and leading central bank researchers in the Bank of England, Bank of International Settlements, and International Monetary Fund. They have served paved the way laying the foundation of experience and technological progress for quick followers to imitate and enhance in design to better suit the requirements of their monetary systems. The implications of CBDC systems on Central Banks, by themselves, are crucial. The said systems will bear considerable impacts on all participants in any given monetary system, especially those within the brackets of Banking, Capital Markets, and FinTech.
Comprehend the implications, identify the risks and recognize the opportunities CBDCs present
Devise constructive blueprint for the adoption of throughout business and technology.
Examine, configure and deploy infrastructure for core technology transforming central bank digital currency systems.
Reinforce CBDC systems in terms of security and resilience to meet the leading standards.
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