Central Bank Digital Currencies or CBDCs are coming into existing global financial systems, whether governments around the world like it or not. Both India and China have begin CBDC trials and are as leading the charge for the CBDC revolution.
As per a new survey on CBDCs by the CFA Institute, emerging markets like India and China have found a broader acceptance for CBDCs.
The finding was publish in a report title ‘Global Survey on Central Bank Digital Currencies‘.
Receptivity to CBDCs was found to be significantly higher among the younger generations of India and China, among many other Asia-Pacific regions.
CFA said in its report :
“Financial inclusion and financial stability constitute two of the key motivations driving interest in CBDCs across the Asia-Pacific region. The survey found significantly greater receptivity to CBDCs among younger respondents, those in the Asia-Pacific region, in developing economies, and in China and India. Developing markets placed greater emphasis than those in developed economies on the role of CBDCs in enhancing financial inclusion,”.
The report said that 42% of its global respondents were in favour of central banks releasing CBDCs.
The number was higher in emerging markets, with the Asia Pacific region recording the most favourable view towards launching CBDCs (59%).
India and China register particularly high levels of support, with 66% and 70% of respondents in favour of launching CBDCs, respectively.
The report said that greater interest in CBDCs in the Asia-Pacific was in line with digital developments in the region.
CFA said :
“The region has been a leader in digital innovation in general and CBDC exploration in particular,”.
“Financial inclusion and financial stability constitute two of the key motivations driving interest in CBDCs across the Asia-Pacific region. In addition, the rapid rise and sudden fall of private cryptocurrencies have sparked interest in CBDCs,”.
Cryptocurrencies are still seen sceptically in the region, owing to volatility in the sector and financial risks involve.
The report said that countries in the Asia-Pacific region have act to curb cryptocurrencies, with China and Thailand banning cryptoassets altogether and India imposing a 30% tax on profits from cryptocurrency trading.
CBDCs function like cryptocurrencies, but they are regularise and issue by the central banks.
CBDCs not only smoothen online payment systems, but also reduces the dependency on cash notes.
India, which has exploring the inclusion of CBDCs in its financial system for some time now, launch its eRupee CBDC into pilot in December 2022.
Many Indian lenders and retailers are working with the RBI to test everyday use cases of the CBDC and ease of operating the token.
The RBI is set to allow CBDC payments to be facilitate by scanning existing UPI QR codes in the country.
As far as China is concern, its eCNY CBDC is already being roll out to the masses in different cities.
From testing it as a salary mode for government employees, to pushing them as ‘good luck’ gifts on new year festivities, China is trying to broaden the use cases of its CBDC.
Since transactions record on blockchain are unchangeable and permanent, CBDC payments would help government maintain a transparent and tamper-proof record of financial transactions, thus reducing chances of fraud or illegal activities.
Japan and South Korea are other Asian nations that are accelerating their research and development work around CBDCs.
CFA said in its report :
“Our survey results show two of the top motivations to explore CBDCs are to provide a cash-like means of payment and to promote financial inclusion. Among emerging markets in the Asia-Pacific region, the top two motivations are to upgrade payment systems and promote financial inclusion. Additional considerations among Asia-Pacific emerging markets include reducing transaction costs and enabling faster detection of illicit activities,”.
As per CFA’s report, the top reason cited to support CBDCs emerged as the same — to accelerate payments and transfers.
Asset management/investment firms, brokerage firms, commercial banks, IT firms, as well as insurance providers are in favour of CBDCs.
CFA said in report :
“CBDCs should replace or dominate private cryptocurrencies. CBDCs will enhance financial inclusion of under-banked individuals and sectors. Competition from a CBDC would prompt commercial banks to improve their services,”.
So some concerns that are associate with the CBDCs at least for now when the tokens are in their initial phases.
The chief concerns are focus on three issues :
- Cybersecurity and Fraud,
- Data Privacy
- Lack of use cases.
