IBM and Official Monetary and Financial Institutions Forum (OMFIF) release a new report showing nearly 3 in 4 global banks think central bank digital currencies (CBDC) should be made available.
There is a high chance that a Central Bank Digital Currency (CBDC) will be released before five years are over. A new research conducted by IBM in conjunction with OMFIF (an institute that supports central banks) shows that policy makers from various major central banks in the world are seriously considering to develop a CBDC, a report by Cointelegraph says.
The research shows that central banks see consumer-ready CBDCs as a viable alternative for fiat money.
The study concludes:
“Central banks are responding to the reality that digital currencies, either privately or publicly issued, will soon be part of the global monetary system, and that it is in their interest to ensure they are neither left behind nor displaced.”
The IBM OMFIF research involved a survey of 23 central banks from both advanced and emerging economies. The findings indicate that 73% of central banks favor the use of CBDC to address retail issues where fiat money can be easily used.
The findings also show that at least half of the respondents were wary that private projects such as Libra pose a threat to monetary sovereignty. Without proper regulations, private digital currencies have the power to undermine central banks’ monetary sovereignty as well as becoming a threat to financial stability. Central banks increasingly acknowledge that understanding and are working closely with the developers of the private digital currencies so they may boost their fiscal regulatory role.
Indeed, Libra has been a thorn to many regulators, especially in Europe where both French and Germany Finance ministers have vowed to never let the cryptocurrency operate within the Eurozone.
The report which was published on Mon 29, Oct. states that the majority of central banks are addressing the reality that digital currencies are here to stay and it is in their own interest to ensure they stay relevant or risk being displaced.
The report notes that 82% of the respondents stated that the main fiscal stability concern in terms of implementing the CBDC was the issue of digital banks which will be faster and could spoil stability as well as confidence.
Gauging on the analysis of the findings, the researchers thus concluded that the maiden CBDC will possibly be functional in a span of five years and will be an alternative to that country’s fiat currency. Interestingly, the report says that this will not come from major economies.
The report reads:
“The principal conclusion is that we are likely to witness the introduction of a central bank — that is fiat — retail digital currency within the next five years, either as a complement to or as a substitute for notes and coins.”