A report from Blockdata on the State of Central Bank Digital Currency (CBDC) in 2022 has revealed reasons why industry stakeholders are holding back on their support for the issuance of CBDCs.
The report is coming at a time when CBDCs are gaining popularity as a tool for making transactions similar to Fiat currency and several Central Banks across the globe are beginning to accept the use of CBDCs for making retail and wholesale payments.
The report stated that while significant progress is being made in the research and applications of CBDCs around the world, a number of companies are opposed to their usage. The American Banking Association (ABA) claimed that a US Fed-issued CBDC would ‘fundamentally rewire’ the banking system because it lacks ‘compelling use cases.’
ABA also thinks that innovation in digital currencies should fall under the purview of the private sector through the development of real-time payment systems and a system of carefully controlled stablecoins.
The report also cited the opinion of Dante Disparte, Head of Global Policy and Chief Strategy Officer for Circle where he said CBDCs are a ‘preposterous idea’ and the company argues that the use of CBDCs will produce better results if the private sector were allowed to innovate with regulatory clearances.
The Widespread Trend in the Issuance of CBDCs
The report highlighted a number of countries that are open to the potential of using CBDCs for making transactions. These countries include Russia, the European Union, Japan, Canada, India, New Zealand, the United Kingdom, China, and Singapore.
India began a pilot phase of testing on the use of the digital e-rupee (India’s digital currency) for retail transactions.
While stakeholders are skeptical about the issuance of CBDCs, the Governor of the People’s Bank of China (PCOB), Yi Gang commented in a news report by InsideCrypto that the challenges that exist in the use of China’s CBDC(e-CNY) can be overcome by the adoption of a two-tiered system.
According to the two-tiered system, The PBOC will be entirely in charge of managing inter-institutional transaction data and providing e-CNY to authorized operators at tier one, while authorized operators will be solely responsible for collecting personal information required for their tier two exchange and circulation services to the public.
Recently, Nigeria joined the CBDC initiative by publishing a cash withdrawal policy aimed at limiting cash withdrawals of individuals and businesses in order to promote the use of the e-Naira.
