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Central bank retail digital currency likely to be issued within five years: IBM-OMFIF Report

Wed, 30 Oct 2019, 06:36 am UTC

In a new survey, IBM and central banking think tank OMFIF have found that a central bank could issue a consumer-ready digital currency within five years.

The report, entitled “Retail CBDCs: The next payments frontier,” is based on an in-depth survey, conducted between July-September 2019, of officials from 23 central banks in advanced and emerging economies.

The survey revealed that not only a number of central banks are seriously considering issuing a central bank digital currency (CBDC) but also that the first CBDC is likely to be issued within five years.

“It is improbable that the first such issuance will come from a G20 central bank; it is considerably more likely to be launched in a smaller and less complex economy in response to a specific policy objective and use case,” the report said.

The authors believe that the CBDC initiatives by central banking authorities will be driven by policy, not technology.

“It remains unclear whether blockchain technology or its analogues are the best route forward for digital currency implementation, and central banks by and large are technology agnostic. Ideally, they will settle on their precise policy objectives and then find the most appropriate technological solution, rather than be wedded to a specific technology beforehand,” the report said.

Underscoring the inability of central banks to offer financial services, it added that a consumer-ready CBDC is likely to require some form of public-private partnership. The report also noted that private sector digital currencies, such as Facebook’s Libra, could possibly undermine central banks' monetary sovereignty and threaten financial stability without appropriate regulation.

The key takeaways include:

  • 73% of respondents said that retail CBDCs should be available under all circumstances and for all types of payments where cash is currently used.
  • More than half of respondents expressed their concerns about the possibility that private challengers like Libra would critically undermine monetary sovereignty.
  • 82% of those responding said their greatest financial stability concern from CBDC implementation was the risk of digital bank ‘runs’ which could damage stability and confidence.
  • 64% of respondents believe that outsourceable ‘intermediation’ functions, such as customer onboarding, would be important for CBDC implementation.

“Central banks surveyed are interested in positioning themselves to launch their own retail CBDCs, as the findings of this report make clear,” said Saket Sinha, global vice president, IBM Blockchain Financial Services. “Large banks and technology companies will have a major role to play as new public private partnerships are formed to promote interoperability, create services, and extend financial inclusion.”

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