Why threshold markets are leading at CBDCs

Why threshold markets are leading at CBDCs

Since more than half of the central banks are working on initiatives for digital currencies worldwide, the payment network dominated by the US dollar could belong in a relatively short time, according to the International payment compensation .

threshold markets are at the top of the movement of the central banks for digital currencies (CBDC), say industry leaders, a trend that is due to the fact that these economies have more urgent, fundamental needs than the further developed markets.

"emerging countries seem to see CBDCs as a way to boost their economies," said Steve Aschettino, a partner of Norton Rose Fulbright, who focuses on Fintech. "In further developed nations there are already existing and widespread electronic payment mechanisms. While you can say that this is an advantage, your existing payment technology can also serve as an obstacle to the creation and broad introduction of a CBDC."

emerging countries that deal with CBDCs have similar goals and motivations, said the biz in a test report earlier this month.

"The provision of a cash -like digital means of payment in view of the reduced use of cash and an increase in private digital payment services is the most common consideration," says the report. "Further important considerations are the strengthening of the competition among payment service providers (PSPS), increasing efficiency and reducing the costs of financial services."

Jamaica, Brazil, Nigeria and Haiti are among the countries that are currently examining the establishment or expansion of CBDC pilot projects. For cash -controlled economies such as Jamaica, CBDCs enable cheaper, safer and more efficient transactions, said the governor of the Central Bank of Jamaica, Richard Byles.

"If you can imagine what a company costs, especially a company with a high cash volume, to manage this cash: to keep it, store, transport - remove digital currencies," said BYLES.

The CBDC infrastructure provider Emtech has worked with the Bank of Ghana, the central bank of the Bahamas and the central bank of Nigeria on CBDC infrastructure projects in recent years. The company recently teamed up with Haitipay, a Haitian fintech company, to demonstrate a CBDC and FinTech Proof-of-Concept in the region. According to Carmelle Cadet, founder and CEO of Emtech, the goal was to demonstrate the effects that a CBDC can have in the Haitian economy.

"Since I was born and grew up in Haiti, I have an idea of ​​how many people have no bank account and no bank account," said Cadet. "When I discovered what blockchain was, I realized that there is a solution that can handle where people come from and how much money they have and gives them access to better financial resources."

Although interest in digital currency has grown, most CBDCs are still in early pilot phases, and those who have progressed are not yet widespread, said Kenneth Goodwin, director of regulatory and institutional matters at Blockchain Intelligence Group. The sand dollar of the Central Bank of the Bahamas, which became the world's first CBDC in 2020, was faced with distribution problems, he said.

"I am talking to John Rolle, the head of the Bahamas Central Bank, he is honestly not a big fan of this idea," said Goodwin. "His job has become much more challenging because he takes this digital asset and tries to find a way to implement it into the system in which they used to have a Fiat currency."

A great advantage of CBDCs for central banks, said Goodwin, is the ability to better understand where - and how - people spend money. Of course, the transparency also entails data protection concerns.

"Every time you digitize a platform, increase both the cyber security risk and the data protection risk," said Goodwin. "Data protection is very, very important in relation to whom the data belongs to whether this data belongs to the individual or the central government, and that is a big problem."

The infrastructure is also a central concern, said Aschettino. Limited broadband access in many countries that deal with CBDCs can significantly restrict the spread, he said.

"These countries must first carry out a complete assessment to see whether citizens have access to the Internet," said Goodwin. "You first have to make an assessment and do not get yourself with the technology, which often happens, you are obtained with the technology, but you do not think of the infrastructure."

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The contribution Why Emerging Markets Are Leading the Charge on CBDCs is not a financial advice.