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Scrutinizing the possibility of issuing a digital currency
CBDCs have the potential to play a huge role in the central bank's efforts to continue providing secure payment instruments, in line with the ever-increasing digitization of people's daily lives.
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Future currency?: A representation of virtual currency Bitcoin and US$1 banknotes are seen in front of a stock graph. Some central banks have warned about the significant speculative elements of bitcoin and other crypto-assets. (Reuters/Dado Ruvic)
The rise of digital transformation in various sectors has proliferated globally, and this trend is expected to continue.
Digitalization has resolved physical infrastructure barriers and lowered the cost of transactions, making financial services more affordable for all. This development presents an excellent opportunity to enhance national output, as well as accelerate the economic recovery from the downturn caused by the pandemic.
One of the digitalization trends that are currently rife is the emergence of various types of crypto assets. To date, there are more than 17,000 types of crypto assets worldwide. Along with technology advancements such as blockchain and distributed ledger technology, those numbers will continue to grow over time and the funds flowing into crypto assets will also continue to grow from time to time.
Nevertheless, many regulators certainly see that crypto-assets still have various negative aspects that could harm consumers. For example, their value is very volatile and there is no guaranteeing authority. Also, their anonymous nature could be misused by irresponsible people.
Against this background, many central banks are considering issuing a digital currency, known as the Central Bank Digital Currency (CBDC), as part of their role in providing trusted money to the public.
CBDCs have the potential to play a huge role in the central banks' efforts to continue providing secure payment instruments, in line with the ever-increasing digitization of people's daily lives.
However, before issuing the CBDC, the central banks must proceed with a careful, transparent and collaborative assessment so that the impacts and risks that may be posed by the issuance of the CBDC could be understood and mitigated as well. This is because the CBDC will greatly affect the stability of the monetary and financial system, as well as the economy as a whole.
