Fitch Ratings asserts that central bank digital currencies (CBDC) could disrupt financial systems as a result of disintermediation and cybersecurity threats.
Financial credit rating agency Fitch Ratings released a research report on May 17 on Central Bank Digital Currencies (CBDCs). The agency claims that CBDCs would provide both benefits and new risks for governments, much of which are already being discussed by authorities.
Fitch notes that the benefits offered by CBDCs are cashless payments, digitization, and the ability to aid unbanked communities. Additionally, they allow for more control over the payments sector, which is often dominated by private companies. CBDCs also allow for better monitoring and prevention of financial crime.
Of course, implementing a new national payments mechanism is fraught with uncertainties. This is a project of tremendous scale, so it’s apparent why governments are taking their time before an official launch.
Fitch notes that “widespread adoption of CBDCs may disrupt financial systems” if associated risks aren’t managed. It describes these risks as funds moving quickly into CBDC accounts from bank deposits, resulting in financial disintermediation and cybersecurity threats between the central bank and the economy.
However, we still may see CBDCs in action sooner rather than later. The benefits are clearly seen as outweighing the cons, and governments the world over are diverting resources into research and development.
CBDC development pace increases
The research and development going into CBDCs are ramping up quickly, with several major economies now actively working on implementing them. Governments are beginning to see the benefits of a blockchain-based payments system in a digital economy. In particular, they value the ability to uplift large swathes of the underprivileged sections with a cheap and fast means of payment.
But noticeably, while China is leading the way, the U.S. has been relatively quiet on any potential developments of a digital dollar. However, there has been some reference to it at the highest levels of government, and there is a digital dollar project in the works by ex-CFTC Chairman Christoper Giancarlo. But by and large, the U.S. has not offered much clarity on the matter.
PwC, meanwhile, has ranked various CBDC projects, ranking the Bahamas’ and Cambodia’s CBDCs at the top.
Source: beincrypto.com
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