CATALINA TOBAR
Approximately 90 per cent of central banks around the world are exploring central bank digital currency (CBDC) – a new digital form of money that has the potential to provide central banks the possibility to offer consumers and merchants access to central bank money in much the same way cash does today but in an entirely digital experience.
This may be particularly valuable in countries where the infrastructure for distributing cash may be unavailable or limited.
Worldwide interest in CBDC remains strong, as this digital currency is essentially viewed as a potential mechanism to help drive financial inclusion, boost economic efficiency, enhance the stability of financial systems, and make public-money movement more efficient, fast, traceable and secure.
As the momentum for CBDC is increasing, we have also seen that certain central banks are starting to look both at retail as well as wholesale CBDC models. As opposed to retail CBDCs – where central banks intend to leverage electronic forms of fiat money to provide financial services to the public – wholesale CBDCs are designed for larger and low-volume transactions, such as settlement of wholesale interbank transactions.
Wholesale CBDCs can help improve the efficiency and speed of inter-bank settlements by reducing the need for intermediaries in the settlement process.
These efficiencies could also translate into lower costs and could also reduce the risk of liquidity shortages and ultimately contribute to the strength of the financial system overall.
On the other hand, retail CBDCs could be used by the public in much the same way as cash, only in digital form, to help provide fast and secure electronic payments. Amongst its benefits are that it is generally less expensive to manage than physical cash, and since it’s traceable, retail CBDCs are considered more secure and less susceptible to risks like loss or counterfeiting.
As central banks continue to dig deeper into retail CBDCs, however, questions on adoption, widespread acceptance and usage are becoming top-of-mind.
In fact, recent research from Visa’s Innovation Centre – gauging Latin America and Caribbean (LAC) customers and merchants’ desirability and sentiments around CBDC – revealed that ensuring interoperability between existing platforms and new forms of money will be a critical element to help drive widespread acceptance of CBDC and ensure people and businesses can use it easily and intuitively from day one.
Participants in the research reported they would mostly use CBDC if it were accepted everywhere, and merchants would only accept CBDC if there were enough consumers paying with them, in addition to expressing concerns on making significant operational investments to accept CBDCs.
[caption id="attachment_1031848" align="alignnone" width="1024"] Catalina Tobar, head of crypto solutions for Visa Latin America and the Caribbean.(Photo courtesy Visa LAC) -[/caption]
So we believe that before retail CBDCs can be widely accepted for everyone, everywhere in the regio
