5 JULY 2021
Central Bank Digital Currencies (CBDCs) - Best of Both Worlds?
With cryptocurrencies such as Bitcoin and Dogecoin getting all the rage in recent years, calls to move away from traditional centralised banking systems have become louder. Bridge+, being a host to provide activities for our community, recently brought in a panel to touch on the interesting thing on everyone’s mind,digital currencies. Cryptocurrency supporters value the decentralised nature of a distributed ledger system based on blockchain technology. However, there are some who maintain that the lack of regulatory oversights and controls mean that cryptocurrencies cannot maintain stable value as a means of exchange. For example, a simple tweet from Elon Musk sent the value of Dogecoin soaring 30% in May 2021.
What if we could combine the best of both cryptocurrencies and a regulated banking system?
Enter Central Bank Digital Currencies (CBDCs). CBDCs aims to bring in the best of both worlds—the convenience and security of digital form like cryptocurrencies, and the regulated, reserved-backed money circulation of the traditional banking system.
To explore this topic of CBDCs further, Bridge+ partnered with Singapore FinTech Festival to host Green Shoots Series 1: Digital Currencies at 79 Robinson Road in June. It was conducted in an exciting hybrid interactive format withinvited members to the event which was also livestreamed to our social media.We were privileged to have distinguished experts in the FinTech industry on the discussion on digital currency adoption and the road towards CBDCs, such asGlobal Head of Coin Systems Onyx by J.P. Morgan, Naveen Mallela,and the Chief FinTech Officer of MAS, Sopnendu Mohanty, and evenMojaloop Foundation Executive Director Paula Hunter, who dialed in all the way from Boston to contribute her views.
Generally, there is a recognition that the current banking system suffers from inefficiencies that would be vastly improved by a blockchain ledger. Blockchain ledgers have often been associated as the backbone of cryptocurrencies, but there are many other permutations for blockchain technology for digital currencies. We could foresee a world with multi-currencies issued by commercial bank and central bank. This presents an exciting future where we have a variety of digital currencies to use – this can bring about greater financial inclusion for the currently unbanked and underserved populations.
With the monetary backing of a central bank and the convenience of a digital blockchain ledger, Central Bank Digital Currencies (CBDCs) could achieve public policy goals of financial inclusion with commercially-driven payment systems. While no country has officially launched CBDCs yet, this is an exciting space to watch with many pilot programmes and research studies in Singapore made into their viability and use-cases. Local examples include Project Ubin, a collaborative project supported by MAS to explore the use of Blockchain and Distributed Ledger Technology (DLT) for clearing and settlement of payments and securities.
Fundamentally, CBDCs reflects a fundamental mindset shift that money is a public good meant to serve people, and not the other way around. People should have easy access to money and the means to conduct transactions with money however they wish to.
To conclude, it was a very enlightening panel discussion on Digital Currency at Bridge+ 79RR together with our partner from MAS. We look forward to continue bringing quality and relevant industry programming to our Bridge+ community. From panel discussions to industry engagement, Bridge+ goes beyond just a workspace, but is here to help our members expand their networks and grow with us.