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BackFinancial sector has experienced lots of turmoil since February 2020. The current COVID-19 crisis has brought more focus on cashless societies and CBDC – Central Bank Digital Currency. What are the recent opinions on CBDC in light of the crisis? Keep reading to find out!
CBDC Will Help Digitize Identities
One of the hottest topics for governments right now is building a digital infrastructure that would help maintain systems while people are on lockdown. Building a national as well as global internet based digital identity infrastructure is one of the key factors in this.
Ajit Tripathi, the host of Breaking Banks Europe Podcast, writes that the potential for creating digital identities and enabling functional cross-border payments is one of the biggest pros of adopting retail digital currencies.
Financial stability for all?
Tripathi also talks about the fiscal stimulus packages that were closed in the US to help markets counter the effects of the COVID-19 crisis. He comments: “Financial stability is about preventing the financial system from becoming unstable and thus causing financial distress for consumers”.
CBDC could allow central banks to become the lender of last resort for households and small businesses, rather than for billionaires. This would stop corporations from borrowing too much, reduce aggregate national debt and provide financial stability.
Greater efficiency with lower costs
Tao Zhang, the International Monetary Fund (IMF) Deputy Managing Director, discussed the pros and cons of CBDC in last week’s keynote in London. He focused on the functional aspects of Central Bank Digital Currencies.
Zhang pointed out that the cost of managing cash can be excessively high in some countries due to its geography – the access to payments system can be restricted for the unbanked and rural population. CBDC would be more efficient in this scenario.
Access to payment systems for the vulnerable
Zhang continued to focus on the unbanked. He stated: “CBDC may provide a public digital means of payment without requiring individuals to hold a bank account”.
This would contribute to stabilizing and strengthening the monetary policy of governments – a topic that is in every country’s current agenda.
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