Bitcoin IBM: Central Banks Will Launch Digital Currencies Within 5 Years
Julio Gil-Pulgar · @gil_pulgar | Nov 12, 2019 | 12:43
Under the fear of potentially losing monetary control, several central banks are focusing on developing and issuing a cryptocurrency. Indeed, according to an IBM-commissioned report, a central bank digital currency (CBDC) could be ready for consumers’ use within the next 5 years.
IBM Sees Serious Future For CBDC’s
The OMFIF-IBM report entitled “Retail CBDs: The next payment frontier” underscores the challenges central banks are confronting because of the advent of Bitcoin and its underlying technology, blockchain. These technological developments are driving policymakers to act. According to the report,
Advances in financial technology are impelling central banks to react to emergent challenges from the private sector and address weaknesses in payments systems.
But not only policymakers are agonizing about the challenges imposed by technological advances. Researchers also point out that since the world financial crises of 2008, consumers do not trust financial institutions. In effect, the distrust of central banks in developed economies is increasing.
As a response to these challenges, the report concludes, central banks are seriously considering introducing a retail digital currency within five years. Researchers define the central bank-issued cryptocurrency as follows:
CBDC, central bank digital currency: a digital asset issued by a central bank for the purpose of payment and settlement, in either retail or wholesale transactions. A ‘retail’ CBDC would be used like a digital extension of cash by all people and companies, whereas a ‘wholesale’ CBDC could be used only by permitted institutions as a settlement asset in the interbank market.
The Use of Cash Is Declining
The OMFIF-IBM report also highlights that the use of cash continues to decline, especially in developing countries. In contrast, the use of private, decentralized cryptocurrencies continues to rise.
The OMFIF-IBM study also finds that the costs of handling cash and related logistical difficulties continue to grow.
Consequently, to maintain control of public means of payments, policymakers are turning their focus to blockchain and other technologies. In this connection, the report concludes,
73% of central bank survey respondents would require retail CBDCs to be available under all circumstances and for all types of payments where cash is currently used.
IBM and the independent think tank for central banking, OMFIF, carried out the study during the summer of 2019. The study included contributions from 23 leading central banks.
How do you think a central bank-issued cryptocurrency would impact Bitcoin’s adoption? Let us know your comments below.
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