Countries launching central bank digital currencies (CBDCs) may face the associated risks involved, but those who do not, face being left behind, says Anton Chashchin, managing partner of Bitfrost.io, commenting on what CBDC implementation could mean for the future of the global market.
Chashchin made the comment in response to The Bank of International Settlements’ (BIS’s) survey on CBDCs.
The report, entitled “Gaining momentum — Results of the 2021 BIS survey on CBDCs”, found nine out of 10 central banks are exploring the implementation of CBDCs, and more than half are now developing them or running concrete experiments.
The report’s authors, senior economist Anneke Kosse and financial market analyst Ilaria Mattei, explained that both the COVID-19 pandemic and the emergence of stablecoins as well as other cryptocurrencies “have accelerated the work on CBDCs”.
They outline this is most evident in “advanced economies, where central banks say that financial stability has increased in importance as a motivation for their CBDC involvement”.
In the BIS report, Kosse and Mattei also outlined that many central banks approached for the survey are working on wholesale CBDCs to improve cross-border payment efficiency.
The report revealed that though central banks perceived wholesale CBDCs to be more capable than retail CBDCs in addressing cross-border frictions, more than two-thirds still said they are “likely to issue a retail CBDC in either the short or medium term”.
Expanding his response to the survey, Bifrost.io's Chashchin says: “It seems the COVID-19 lockdown was the awakening we needed to realise the potential of a cashless society reinforced by digital currencies. With consumers seeing digital assets as a form of refuge from the rising inflation rates and cost-of-living crisis, we are now seeing that this is driving the adoption rates for institutions who wish to be of service to these customers.”
He adds: “Some countries have taken big steps to launching CBDCs and China has already launched a pilot of its digital yuan. These moves have accelerated a global race to explore the technology and policy makers face risks in both directions; while there are risks involved in a CBDC, a country risks being left behind by those who have made a success of it — if it delays.
“There is still some experimentation to be done to find out how best to roll out a CBDC, but it could be a game-changer for policy makers and how the economy runs.”
Chashchin concludes: “It is fascinating that the investigation of CBDCs is this widespread. It shows we are not far off accepting digital assets at the government level. Not long ago, most central banks would have dismissed these ideas, but slowly the potential benefits are swinging the argument and turning sceptics into supporters.”
