About 50 countries are in the development, pilot or launch phase of a central bank digital currency (CBDC), according to Josh Lipsky, senior director at the Atlantic Council’s GeoEconomics Center.
That means about half of the countries working on a digital currency are well ahead of the U.S. in this regard, Lipsky told CoinDesk on July 20.
While it’s a legitimate issue, the U.S. has “moved more slowly because of privacy concerns,” he said, adding that the digital dollar project — which has not been approved — is falling behind others.
Among other things, that means that the U.S. is missing the opportunity to be a standard setter when questions about interoperability loom large, he said.
“If you think countries are going to look to alternatives to the current financial system, alternatives around SWIFT, alternatives to bank-to-bank dollar transactions, wholesale CBDCs actually open up some avenues for them,” Lipsky said.
Meanwhile, former International Monetary Fund (IMF) chief economist and Harvard professor Kenneth Rogoff told Bloomberg that he believes central banks are throwing out the idea of CBDCs in order to move the conversation away from how far behind they are on regulating cryptocurrencies.
Aside from saying that many of the goals of a digital dollar can be achieved by “tweaks” to the current system, Rogoff joined banking industry groups in warning of “massive disintermediation” that the economy might not be able to handle.
Cause for Gratitude?
Those banks should view a digital dollar as a lifeline rather than a threat, Co-Pierre Georg, a professor of financial stability studies at the University of Capetown in South Africa and an advisor to the Algorand Foundation, recently told PYMNTS.
Read more: Banks May Have it Wrong. The Digital Dollar Could Be Lifeline, Not a Threat
With Big Tech companies moving into banking services, Georg — who holds the South African Reserve Bank chair in financial stability studies — said “the banks really have it backwards. They should be terrified of Big Tech.”
Georg said CBDCS give banks “a lifeline in terms of public infrastructure, on which they can all come together. They can all compete, but importantly, they can compete with tech companies.”
At the same time, Georg said CBDCs shouldn’t be viewed as a competitor of real-time settlement systems like FedWire in the U.S., TARGET2 in Europe and CHAPS Sterling in the U.K. — all of which he said are working well.
What they don’t do, he said, is “facilitate some of the new innovations that we’ve seen from private crypto assets that require a decentralized ledger,” such as the tokenization of physical and digital assets.
Going Global
China has expanded its digital yuan pilot program to 23 cities, covering about one-fifth of its population. However, the country is still having trouble getting people to adopt it, Nikkei Asia reported July 22.
The problem, the newspaper said, appears to be that people don’t see much difference between the e-CNY — its formal name — and the two dominant payments apps, WeChatPay and Alipay.
The Reserve Bank of India, meanwhile, plans to begin pilot programs for a phased implementation of a wholesale and retail digital rupee by early next year, according to its deputy governor, T. Rabi Sankar, Bloomberg reported July 22.
That is because it will require legal changes to the country’s foreign exchange rules and information technology laws, he said. The CBDC’s introduction will protect people from the volatility of private virtual cryptocurrencies while also helping reduce cash use in the economy, Sankar added.
Australia’s central bank governor said that well-regulated, privately issued stablecoins could have more benefits than a consumer-facing retail CBDC, Reuters recently reported.
Speaking at a meeting of the group of 20 richest nations in Indonesia last week, Phillip Lowe said, “I tend to think that the private solution is going to be better — if we can get the regulatory arrangements right — because the private sector is better than the central bank at innovating and designing features for these tokens, and there are also likely to be very significant costs for the central bank setting up a digital token system.”
That said, the “if” is a big one. If they are not state-issued, he said, they would need to be “regulated just as we regulate bank deposits.”
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