Central bank digital currency
March 8, 2021
CBDC offers new ways to include the underbanked, and unbanked, in digital payment systems and open securities market access to more people.
The recent emergence of Central Bank Digital Currency (CBDC for short) is no longer a fringe discussion point, but drives a number of serious questions in the mainstream with central banks globally.
- Will a CBDC put the central bank into competition with licensed commercial banks in serving citizens?
- Could a CBDC provide better digital and banking inclusion to the unbanked and underbanked?
- Is CBDC an exchange control compliant solution to improving the often illicit cross border and diaspora payments industry?
- How does a CBDC impact the role of a Central Bank in the Net Interbank Settlement space?
- Would a CBDC coexist or replace Fiat Backed Stable Coins issued by Private Companies and potentially Commercial Banks?
- Can CBDC bring better transparency or even stability to capital, repo and derivative markets?
In our varied engagement with Central Banks, it is clear that the concept of CBDC has far reaching implications for all players in the financial industry.
CBDC IN THE CONTEXT OF GLOBAL FINANCIAL MARKETS
One of the often overlooked perspectives is that CBDC could play a critical role in the global arms race for economic influence – especially in the context of the US Dollar as Global Reserve Currency and Floating Exchange Rate systems.
Inevitably major economies will look to new and unique ways to leverage their economic influence – be it their ownership of major foreign treasury debt, stockpiles of precious metals, or natural resources – in order to exert more pressure on the global financial market, and CBDC presents a unique mechanism to achieve that in radically more efficient ways than was possible before.
OUR APPROACH TO CBDC
With so much still unknown about how CBDC could change the landscape of how other countries and local stakeholders engage economically with a country, what is clear is that the technological infrastructure used to do build up a central bank’s positioning needs to provide for oversight, compliance and a wide range of applications.
As we continually improve the infrastructure products we deploy for these kind of programs, we prioritise support for fungible and non-fungible tokens, diverse chain authority and governance mechanisms, security and operating integrity models, transactional performance, and extensibility in the solution design to ensure clients are able to expand into any of the emerging applications that we see being investigated by astute central banks around the world.