Adoption of digital currencies issued by central banks is challenging; in Asia-Pacific, Mastercard leads the way in blockchain technology and digital assets.
Customers “feel so at ease using today’s type of money.” “There isn’t enough rationale for a CBDC,”
But having a CBDC might make sense in a nation where the local payment network is not as strong.
Broad adoption of such assets is “difficult” because there isn’t enough rationale for the widespread use of central bank digital currencies at the moment, according to Ashok Venkateswaran, Mastercard’s blockchain and digital assets lead for Asia-Pacific, who spoke with CNBC.
The challenging aspect is adopting. Thus, just like cash nowadays, you should be able to spend CBDCs wherever you want, according to Venkateswaran, who made this statement on the fringes of the Singapore FinTech Festival on Wednesday.
A retail CBDC serves both individuals and businesses by facilitating daily transactions in the digital form of fiat currency that is issued by central banks. This is not the same as a wholesale CBDC, which is only utilized for the settlement of significant interbank transactions by commercial banks, central banks, and other financial organizations.
According to the International Monetary Fund, CBDCs are “a safe and low-cost alternative” to cash, and roughly 60% of the world’s nations are currently investigating them. As of June, however, according to data from the Atlantic Council, only 11 countries had adopted them, with 53 more in advanced planning stages and 46 conducting research on the subject.
However, it takes a great deal of time and work on the part of the nation to build the infrastructure necessary to make that possible. However, many central banks today have become extremely inventive as a result of their close collaboration with private businesses like ours to build that ecosystem, stated the Asia-Pacific lead.
Even so, Venkateswaran claimed that there is “not enough justification to have a CBDC” because customers are “so comfortable using today’s type of money.”
The second-largest card network in the United States, Mastercard, announced last week that it had finished testing its solution in the e-HKD pilot program of the Hong Kong Monetary Authority, which aims to replicate the use of a retail CBDC like electronic Hong Kong dollars.
Using Singapore as an example, where there is a “very efficient” payments system, the case for retail CBDC is not strong enough.
Singapore and Thailand were identified as the Asian nations that have made “quick progress” by connecting rapid payment systems, thereby reducing transaction fees for cross-border payments, by the IMF’s deputy managing director Bo Li last year.
Venkateswaran stated, “There is a case for a wholesale CBDC for interbank settlements, but there isn’t a reason for a retail CBDC [in Singapore].”
The central bank of Singapore declared on Thursday that starting in 2024, wholesale CBDCs will be issued and used in a live pilot program.
According to managing director Ravi Menon of the Monetary Authority of Singapore, the pilot will test the use of wholesale CBDCs to facilitate domestic payments through cooperation with domestic banks.
According to Venkateswaran of Mastercard, it really depends on the needs of the nation or the issue they are attempting to resolve.
“If you’re just trying to replace your existing domestic payment network,” it won’t work, he stated.
“But having a CBDC might make sense if the nation’s domestic payment network is not as strong.”
