- Countries representing 95% of the world’s GDP are now using or looking into CBDCs.
- Asian central banks have finished the latest CBDC transaction experiment.
- Asia-Pacific nations have led the way in digital innovation.
Asian central banks have completed the world’s largest pilot of central bank digital currency transactions. This comes to light in an announcement by the Central Bank of the United Arab Emirates (CBUAE) on Wednesday.
Project mBridge, which tests cross-border payments, included the pilot in its scope. They accomplished this by leveraging a shared platform built on distributed ledger technology (DLT). The issuing and trading of CBDCs by the central banks also take place on this platform.
In an effort to offer a substitute for cryptocurrencies, central banks around the world have been rushing to create CBDCs. Significantly, the Atlantic Council reports that 100 nations, or 95% of the global GDP, are either utilizing or investigating CBDCs. The diversity of technology, however, is a problem for the central banks.
This is a significant increase from the 35 countries that were considering CBDCs in May 2020. Similar findings were made by the Bank for International Settlements (BIS 2022a). According to the firm, more than half of the 81 central banks surveyed (representing 94% of the world’s economic activity) are studying CBDCs.
However, as governments embrace CBDCs, they have several challenges. Concretely, according to the Antlantic Council, citizens could pull too much money out of banks at once by purchasing CBDCs. This could trigger runs on banks, affecting the ability to lend.
Additionally, CBDCs require a complex regulatory framework including privacy, consumer protection, and anti-money laundering standards. The standards, however, need to be made more robust before adopting this technology.
In conclusion, Asia-Pacific countries have been at the forefront of digital innovation, and their interest in CBDCs is a natural next step. There are many reasons behind Asia’s interest in CBDCs.
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