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Regulatory Series on Cryptocurrencies: BIS Sheds Some Light on Evolution of CBDC Amid Pandemic Covid-19
Amid the widening of outbreak of Covid-19, various central banks across the globe seem to be inclined for the digital currency system. Day by day the total number of confirmed cases and reported casualties of the deadly contagious Covid-19 have been exceeding, while many major markets are struggling with a trauma for the last 6 months or so.
It is quite tough to foresee when the adverse impact of prevailing contagion begins to subside and resumes normalcy, any which ways, life will never come back to normal. Online businesses are going to be in the bright spot with much less contact.
Hence, with sovereign governments and their central banks across the globe have been exploring the essence and the opportunities of CBDC (Central Bank Digital Currency) foreseeing a swift transformation phase in the prevailing finance system. Central banks likely to play pivotal role in ensuring safety and integrity of the payment system. Digital innovation radically reshapes the provision of payment system.
BIS (Bank for International Settlements) reckons that the central bank digital currencies (CBDCs) are going to be the new forms of digitally guaranteed fiats by the sovereign governments, that seems likely to be the evolution of money.
Well, the BIS divulges that the central banks are well-positioned to adopt changes in the budding technologies and bring in paradigm shift in the current payments infrastructure, as per the annual economic report.
“Technology – in particular, in the field of digital currency – opens up opportunities for payment systems. CBDCs combine this innovative technology with the tried and tested foundation of central banks. It is the central banks’ choice to harness these forces for the common good. They can combine their role as catalysts, overseers, and operators and develop an entirely new set of payment arrangements that run on digital currencies.”
Very recently, European Central Bank (ECB) has also been exploring ways through which it can develop its payments infrastructure and is evaluating solutions with the help of blockchain technology and its pros & cons.
However, the questions, such as, ‘how are the long-term cyclical effects of this pandemic likely to manifest’, and ‘how can we position ourselves for a new future under unexpected circumstance’ have resulted the sovereign governments and their central banks across the globe to explore the essence and the opportunities of CBDC (Central Bank Digital Currency) foreseeing a swift transformation phase in the prevailing finance system.
BIS highlighted the pandemic Covid-19 hitting economic activity, the vulnerabilities of longer and more geographically extended trade credit chains coming to the fore, especially those related to international trade. They also emphasize in the section of fintech that the future of central banking is inextricably linked to innovation. At the beginning of this year, the consortium of various central banks (the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Sveriges Riksbank and the Swiss National Bank) were to assess the potential cases for central bank digital currencies. They work together with the Bank for International Settlements (BIS), have created a group to share experiences as they assess the potential cases for central bank digital currency (CBDC) in their home jurisdictions.