As countries across the globe are ready to roll out the Central Bank of Digital Currencies (CBDCs), the move seems to have found its naysayers. Independent trade associations across the world have opposed this move. “Stakeholders are against the implementation of CBDC because of major concerns in terms of its design, interoperability with existing systems, privacy, and anonymity,” Shivam Thakral, CEO of BuyUcoin, a cryptocurrency exchange told FE Blockchain.
Recently, in a speech at the central bank’s annual meeting, Bank of Indonesia’s Governor Perry Warjiyo explained that the bank plans to make its CBDC the only legal tender. The country launched its CBDC in December called ‘Project Garuda’ via which it will roll out digital rupiah for use cases of issuance, redemption, and interbank fund transfer.
Furthermore, the American Banking Association (ABA), flagged a warning stating that the US-fed-issued CBDC lacks compelling use cases and would fundamentally rewire the banking system.
Global CBDC initiatives overview. Source: Atlantic Council
As per market analysts, the convenience, effectiveness, and safety of current payment systems are expected to be improved by CBDC-spurred innovation in the payments market. The rise of CBDCs will require robust blockchain infrastructure and world-class digital asset storage solutions with impeccable security. It is also important to note that mass adoption of CBDCs will largely depend on merchant-customer convenience. It will be necessary to make it’s functioning simple and within reach of the common man,” Manan Vora, senior vice president (SVP) of Strategy and Business Operations at Liminal, a digital wallet infrastructure platform, said.
While last week, Shaktikanta Das, governor, The Reserve Bank of India (RBI) cleared the air by stating that the pilot CBDC tends to leave no trace with a bank and that there is no need to inculcate fear psychosis in people’s minds regarding confidentiality. “Indians use digital currencies for online payments that are backed by real money issued by the RBI. There’s no incentive for them to swap online payments for CBDC. Both are issued and backed by RBI. Both are digital. CBDC offers no differentiation. It’s one of those rare innovations that serve no purpose,” Pushkar Singh, Partner at Tremis Capital, an investment firm, noted.
Meanwhile, market experts noted that stakeholders should welcome the introduction of CBDCs. “The industry has enough space for digital currencies and digital assets to co-exist and complement each other’s growth. However, transparency should be an integral part of CBDC-based transactions which can be made possible by deploying blockchain tech at the core of digital currency operations,” Tarusha Mittal, chief operating officer (COO), and co-founder, UniFarm and Dapps, a decentralised group staking platform, claimed.
Meanwhile, the RBI unveiled a plan on November 22 to start a retail CBDC pilot program by the end of 2022. According to reports, the retail digital rupee pilot rollout will initially be tested among 10,000 to 50,000 users of participating banks. It is currently in its final stages of preparation by the RBI.