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According to a report from the World Economic Forum that was recently published, tons of central banks globally are presently or will soon be experimenting with Central Bank Digital Currencies (CBDCs).
Mentioning a January 2019 report published by the Bank for International Settlements (BIS), the WEF states that a minimum of 40 central banks across around the world are conducting research projects and pilots with blockchain technology that aim to address issues such as financial inclusion, payments efficiency and cybersecurity.
The report states that CBDCs, which are issued on distributed ledgers which also has the capability to be transacted in a peer-to-peer manner will supposedly enable faster and more cost-efficient transactions.
The report also lists the potential to improve Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures, reduce tax evasion, corruption and illicit activities, challenge commercial bank monopoly power of retail deposits, and potentially provide alternatives to private sector payments technologies. The report reads:
“Moreover, CBDC can potentially play an important role in a future where cash usage dramatically declines. If the use and availability of cash within a country becomes extremely low or non-existent, whether by policy or consumer preferences, then CBDC could potentially aid citizens.”
The report continues with a list of potential downsides of CBDCs, saying that banks should consider the challenges of blockchain technology, including transaction Scalability, key management, transaction speeds, possible financial exclusion of populations who do not adopt CBDC — which could lead to further marginalization from digital payment systems — as well as risks to financial stability from bank disintermediation.
If you remember, we posted an article, that general manager at the BIS, Agustin Carstens advised against the issuance of CBDCs, claiming that a CBDC could facilitate a bank run, enabling people to move their funds from commercial banks to central bank accounts faster, thus destabilizing the system.
Do you see this happening in the nearest future? Comment below let’s discuss or Head over to Discord now Let’s talk about it.
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