The annual BIS Report by Bank of International Settlements has been released, and it says that Coronavirus pandemic has accelerated the need to create central bank digital currencies. The report mentions that central banks must realize that the time to move ahead with CBDC projects has come.
The COVID-19 has exposed many new cracks in the traditional financial systems. The BIS Report also states that the central banks have an opportunity to speed up CBDC projects and accelerate the digitization efforts substantially. The international banking body has also suggested that many developing countries can accelerate their CBDC projects to tackle conventional local banking challenges.
Warming to #CBDCs? Central bank digital currencies can foster competition among private sector intermediaries, set high standards for safety and risk management, and serve as a basis for sound innovation in payments #DigitalPayments https://t.co/kZgUChmpTV pic.twitter.com/bcjAchXU9l
— Bank for International Settlements (@BIS_org) June 27, 2020
Furthermore, BIS mentions how the current payment digitization phase will have a significant impact on the upcoming CBDCs. The first few countries to launch their CBDC will certainly have the edge over the others. Presently, many central banks across the globe are developing digital currencies in varying capacities, and some have reached the testing phase.
BIS Report says financial sector undergoing a transitional phase
The BIS Report has crucial insights into the financial sector. It says that the financial realm is currently undergoing a transitional phase that is sure to transform the conventional monetary mechanisms. The central banks are implementing radical payment systems and shifting aggressively towards digitization.
The new systems have changed the banking ways by lowering costs and transforming the user experience. The report further mentions that central banks also have to shape public opinions to bring about this sea change. BIS Report says CBDCs provide a whole new range of payment options that are safe, transparent, trusted, and beneficial for the general public.
China at the forefront of the CBDC revolution
Chinese digital Yuan represents the pinnacle of CBDC so far. The country has been leading the CBDC race and has reached the testing phase. Despite minor delays due to the COVID-19 pandemic, the People’s Bank of China is on the verge of launching the Digital Yuan called ‘Digital Currency Electronic Payment.’
Presently, digital currency is undergoing testing in four Chinese cities. With a launch scheduled in 2020, China is set to become the first country in the world to launch its digital currency and surpass the western nations. Facebook is the next closest competitor that is working fast to develop its Libra digital currency.