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SIBOS 20: Defining central bank digital currencies is not easy

A very distinguished panel of payment of experts:

  • Markos Zachariadis, Greensill Professor in FinTech, Alliance Manchester Business School, University of Manchester
  • Alistair Milne, Professor Financial Economics, School of Business and Economics, Loughborough University
  • Arwen Smit, Author & Senior Advisor, MintBit
  • Harish Natarajan, Lead, Payments and Market Infrastructures, World Bank

chaired by the very loud and also very expert Aaron Klein (M), Fellow in Economic Studies, Brookings Institution tried to define what Central Bank Digital Currencies (CBDC) really are.

The first thing that was clear from the discussion was that there are multiple issues that need to be resolved:

  • will there be a single ledger-based currency to take the place of the central bank controlled coins and notes or will there be various forms
  • the geopolitical dimensions will affect development, e.g. China is being driven by the need to protect their currency’s sovereignty
  • how to access the new CBDCs which could be a major problem
  • can they be held by a non-bank?
  • wholesales/business-to-business usage will probably be first, but it could vary by country or region; in some countries, consumer usage may lead the way
  • CBDC will exist in various forms, e.g. three forms – direct issuance, hybrid/taken based and two-tiered issuance system, or other forms
  • Blockchain technology might or might not be involved, but it is not a pre-requisite
  • Private money/investment is going to spur the central banks to take charge of this space/market
  • Interfacing the new CBDCs with the existing payment systems = a major problem
  • Privacy is going to be a major problem, e.g. some systems are being considered that will allow banks?/the authorities? to identify who used the CBDC
  • Is there going to be? Will there ever be a single global currency?
  • How are central banks going to create trust in their CBDCs?

Also, again and again, panel members talked about research going on about what accounts will be affected, e.g. what impact will CBDCs have on the country’s economy, etc.

Ctmfile take: As we wrote in August, Central Bank Digital Currencies are coming. It will take some years, but corporate treasury departments need to keep a watching brief as they could, in specific countries, come very quickly.

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