Central bankers discussed the emerging central bank digital currency (CBDC) environment at the Sibos conference in Beijing on Tuesday.
According to Finextra, representatives from China, the Bahamas, Kazakhstan and Europe spoke about the nuances of this growing subset of the fintech sector.
Key takeaway: For widespread CBDC adoption to become a reality, a more complete ecosystem is needed.
According to Changhong Mu of the China Digital Currency Institute, improving the legal environment is necessary to properly integrate CBDC or eCNY (digital yuan or digital yuan) and increase public awareness.
“Let every market participant understand what you do, what products you have and what incentives you can provide,” he said. “Then we can create a whole ecosystem for the market.”
Mu also talked about China’s multi-tier digital yuan wallet system, which allows users to open a basic wallet using just a phone number. This system balances privacy and anti-money laundering (AML) efforts, while also limiting wallet balances to prevent illegal activity. Mu emphasized the importance of artificial intelligence and big data technologies in ensuring transaction security and protecting user privacy.
Evelien Witlox of the European Central Bank outlined progress on the digital euro, which has not yet been officially launched but is currently in the development and research stages.
Privacy concerns remain at the forefront of design. To structure it for retail use and provide both online and offline functionality, central banks want to ensure that online transactions are anonymous once cleared by the central bank.
Meanwhile, offline transactions will resemble the level of privacy of cash exchanges.
Witlox stressed that stakeholder feedback and ongoing research are critical as the digital euro moves towards standardization.
Henry Campell from the Central Bank of the Bahamas shared his thoughts on the Digital Sand Dollar, the world’s first fully deployed CBDC.
The coin, released four years ago this month, made the Bahamas a pioneer in digital currency.
Sand Dollar, which is currently in limited production, is expected to be fully operational by 2025 and integrated into tax management, decentralized finance (DeFi) and cross-border payments. Campell noted that a CBDC reduces the costs and risks associated with cash and increases circulation.
Asel Marchenko from the National Bank of Kazakhstan focused on fighting corruption, expanding cross-border payments and integrating with DeFi. Transparency in government spending is a priority as CBDC provides citizens with information about the use of public funds.
Marchenko predicted that CBDCs will gain global popularity due to their interoperability and effectiveness in facilitating cross-border transactions.
The panel concluded with advice for central banks to work closely with private sector organizations and develop clear business strategies to drive adoption.