© Reuters
Investing.com – There is not enough justification for the widespread use of central bank digital currencies at present, making large-scale adoption of these assets “difficult”, said Ashok Venkateswaran , Mastercard’s (NYSE:) Head of Blockchain and Digital Assets for Asia Pacific.
“What’s difficult is adoption. So if you have CBDCs in your wallet, you should have the option to spend them wherever you want – very similar to cash today,” Mr. Venkateswaran said.
A retail CBDC, which is the digital form of fiat currency issued by a central bank, is aimed at individuals and businesses and facilitates everyday transactions. It differs from wholesale CBDC which is used exclusively by central banks, commercial banks and other financial institutions to settle high-value interbank transactions.
The International Monetary Fund has stated that CBDCs are “a safe and low-cost alternative” to cash, and that around 60% of countries around the world are exploring CBDCs. However, only 11 countries have adopted them, 53 others are in an advanced planning stage and 46 were researching the topic as of June, according to Atlantic Council data.
“But [construire une infrastructure pour faciliter cela] requires a lot of time and effort on the part of the country. But nowadays, a lot of central banks have become very innovative because they work closely with private companies like us, to create this ecosystem,” said the head of the Asia-Pacific region.
Even so, Venkateswaran said consumers are “so comfortable with today’s type of currency” that there is “no sufficient justification for having a CBDC.”
Mastercard, the second-largest card network in the United States, said last week that it had completed testing of its solution under the Hong Kong Monetary Authority’s e-HKD pilot program to simulate the he use of a retail CBDC such as the Hong Kong e-dollar.
A total of 16 companies from the finance, payments and technology sectors, including Mastercard, participated in the pilot. Mastercard rival Visa (NYSE:) also took part in the project alongside HSBC (LON:) Bank and Hang Seng Bank, testing the viability of tokenized deposits in business-to-business payments.
Mr Venkateswaran cited Singapore as an example where the case for retail CBDCs is not compelling enough, as the city-state has a “very efficient” payments system.
Last year, Bo Li, deputy managing director of the IMF, singled out Singapore and Thailand as Asian countries that have made “rapid progress” in connecting fast payment systems, thereby reducing transaction fees for cross-border payments.
“There is no reason for a retail CBDC [à Singapour]but there are reasons for a wholesale CBDC for interbank settlements,” Mr. Venkateswaran said.
On Thursday, the central bank of Singapore announced that it would pilot the issuance and use of wholesale CBDCs from 2024.
During this pilot, the Monetary Authority of Singapore will collaborate with domestic banks to test the use of wholesale CBDCs to facilitate domestic payments, said Monetary Authority of Singapore Chief Executive Officer Ravi Menon.
It really depends on the needs of the country or the problem it’s trying to solve, Mastercard’s Mr. Venkateswaran said.
It won’t work “if you’re just trying to replace your existing national payments network,” he said.
“But if it’s a country where the national payments network is not as robust, it may make sense to have a CBDC.
