The World Economic Forum (WEF), known for its goal of strengthening the international financial system, discusses central bank digital currencies (CBDCs) after Australia becomes the latest country to take part in the currency trial.
“Money isn’t paper and coins anymore”, the WEF says, citing CBDC explanations from several central banks that issue and manage these digital currencies.
The European Central Bank (ECB) explains that “central bank money is a risk-free form of money that is guaranteed by the state”, while the Bank of England explains that “£10 of a UK digital currency would always be worth the same as a £10 note”.
The blog post goes on to explain how CBDCs work and how safe they are. According to the Federal Reserve, a CBDC would be “the safest digital asset available to the general public, with no associated credit or liquidity risk.”
The Reserve Bank of Australia announced a collaboration with the Digital Finance Cooperative Research Centre (DFCRC) to study use cases for a central bank digital currency (CBDC) in Australia.
With over 100 countries investigating CBDCs, the World Economic Forum weighs in on the success and benefits of such currencies for the general public.
For example, in October 2020, the Bahamas became the first country in the world to launch a national central bank digital currency called the Sand Dollar. It has also made it easier for people to transfer money across “an otherwise vast archipelago”, according to Deloitte.
The digital currency would then be presented as a faster, easier, and more secure method of payment.
According to the blog post, digital currency is a “fast, easy, and secure” way to make daily payments.
“A digital currency would complement, rather than replace, physical cash”.
The International Monetary Fund also states that “The resilience of financial systems could also be boosted. If a natural disaster or the failure of a payments company made cash unavailable, a CBDC could provide a back-up.”
CBDCs face challenges such as low trust in the central bank (Ecuador’s digital currency was canceled three years after it was launched in 2017), potential cybersecurity threats, making it widely available enough for financial inclusion, and having appropriate technical and legal frameworks in place.
