The Central Bank Digital Currencies (CBDC) have become a relatively familiar concept, and countries across the globe are looking towards its usage.
In a recent media interaction, Michael Greco, the director of the Digital Dollar Project, and Josh Lipsky, senior director of the Atlantic Council’s GeoEconomic Center, gave a fair share of information regarding the subject.
On being asked his views on the developments in the CBDC world this year, Lipsky said that the questions regarding CBDC changed to “if” from “how and when.”
Further, he says that 2022 started with around 75 to 80 central banks exploring digital currency. Currently, over 105 central banks are moving into the research and development phase and then to the piloting, etc. These banks represent over 95% of the global GDP, implying the inclusion of major economies.
As per Lipsky, many major economies have made “huge leaps” this year, including India, South Korea, and Europe. He highlights that this year was the time when CBDCs saw the involvement of the major economies as well as the smaller economies. He also predicts that in the coming years, these economies will see major deployment in this field.
On being asked the same, Greco said that President Biden’s executive order for the responsible development of digital assets was his most significant part. In addition, he counts on certain reports from institutions and ongoing projects that imply the progress of the US in consideration of a CBDC.
However, he acknowledges that the country still lags behind major economies in consideration of a CBDC and is taking a cautious approach toward research. Nevertheless, he sees this year as a major step forward and the upcoming year to accelerate the process further.
Lipsky sees the next year to be noticing two major things. The first one is the European Central Bank (ECB) entering into its pilot from the research and development phase as one of the major events for the CBDC in the coming year. This will also attract major banks’ attention to topics like technology, privacy protection, interaction with commercial banking systems, etc.
The second significant thing on the table for the upcoming year is the wholesale CBDC. Contrary to the dominance of the retail CBDC, the Atlantic Council has noticed that the past six months have seen a significant increase in interest in the wholesale CBDC. He adds that in the past six months, wholesale CBDC has nearly doubled.
Lipsky sees the increasing interest in the wholesale segment would invite large banks to test the idea of carrying bulk transactions in CBDC globally. He also referred to the recent first trial event between China, UAE, and Thailand.
On the other hand, Greco is more intrigued by the action of the Capitol regarding the CBDC in the US. He said that the Federal Reserve is waiting for Congress to pass legislation before it moves toward digital currency.
While he acknowledges the fact that he doesn’t exactly see a law being passed this year but is looking forward to advancements in the discussion, especially regarding privacy.
In light of the recent happenings in the crypto sector that sparked a contagion, Greco said it is pertinent to keep crypto and stablecoins and the issue regarding the exchanges different from CBDCs. However, he acknowledges that it is appropriate to keep them in the picture, considering their underlying technology and the ties between all these digital assets.
Lipsky also supported Greco’s view and said that not all CBDCs are built on the blockchain; some are also built on centralized ledgers. He adds that the CBDCs are very different from decentralized finance (DeFi) in many aspects. However, he mentions a prevalent practice of countries implementing crypto regulation as soon as they progress in CBDCs, and he foresees it to continue in the coming times.
On being asked about the major ongoing CBDC projects, Lipsky mentions the digital Rupee pilot going on in India as it will bring onboard millions of people. He also adds that an intriguing part of it is the inclusion of retail and wholesale CBDC simultaneously. He mentioned the wholesale CBDC testing in the US as the New York Federal Reserve is testing the wholesale segment in collaboration with 12 banks and the Monetary Authority of Singapore (MAS).
Interestingly, Greco contradicted Lipsky’s view of the CBDC scenario in the context of the US. He said that, according to him, there are more questions of “when” than “if,” as he foresees the implementation of CBDC in the country not sooner than a few years.