Yahoo Finance 'Majority' of central banks 'actively exploring' digital currencies
The majority of central banks around the world are examining whether to launch nationally-backed digital currencies, a senior Asian policymaker has said.
Tharman Shanmugaratnam, Singapore’s senior minister, said most central banks were looking into the space in response to the rise of e-commerce and alternative payment companies.
“The majority of central banks are now actively exploring the issue of central bank digital currencies but it’s not a foregone conclusion that most central banks will issue CBDCs [central bank digital currencies],” Shanmugaratnam said on a panel at the World Economic Forum’s Davos Agenda conference on Thursday.
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Multiple central banks around the world have announced pilot investigations into the idea of launching a digital currency, including the Bank of England. The probes have led to speculation that we could see the launch of digital pounds and dollars to rival cryptocurrencies like bitcoin.
Shanmugaratnam said central banks had a duty to get to grips with the space given the growth of e-commerce and the level of innovation in the space.
“The fundamental issue that we are responding to is the rise of e-commerce the upending of whole industries as a result of digitisation of payments, sales, delivery,” he said.
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“Together with e-commerce you now have new means of payments and new payment providers that are emerging. The old world of cash on the one hand — notes and coins — and bank account-based payments — the traditional two tier system comprising of central banks and commercial banks — that old system is being disintermediated.”
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The last decade has seen the creation of multiple new payment companies that have grown into multi-billion dollar businesses, such as Ant Financial in China, Klarna in Europe, and Stripe in the US.
“There’s been tremendous innovation in the private sector,” Shanmugaratnam said. “New non-bank players have emerged, in some cases like in China, as formidable competitors.
“We don’t want the race to stop and our attitude should not be at this stage to try and pick which horse is going to be the winner.”
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Shanmugaratnam said a “hybrid” system was likely to emerge, with a blend between traditional banks and new non-bank players.
Arguably the most advanced national digital currency investigations have been in China, where leaders in major cities this week committed to public test programmes later this year.
Dr Zhu Min, chairman of China’s National Institute of Financial Research, said there were potentially “hundreds of uses” for a digital yuan, which he said could “improve efficiency, accuracy and transparency.” of government policy.
“The potential for central bank digital currency in the real economy is huge,” he said, appearing alongside Shanmugaratnam.
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