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With China set to launch the world’s first Central Bank Digital Currency (CBDC) by the end of the year, pressure is mounting on the world’s other major central banks to join the digital revolution.
When discussing the topic at Swell 2020, both David Mills from the Federal Reserve Board (FRB) and the European Central Bank’s (ECB) Ulrich Bindsell admitted that their organizations were lagging behind the central banks of China, Sweden and the Bahamas in pioneering progress towards CBDCs.
The annual Ripple Swell Global conference brings together the world’s trusted leaders in financial services and blockchain technology, though in a virtual setting this year. Speaking from Frankfurt, Ulrich suggested that the ECB’s measured stance on CBDCs was partly based on the conservative approach to adopting new payment technologies shown by many Europeans.
Like much of the world, the US and Europe has seen a trend towards fewer cash transactions, especially since the pandemic. However, this decline is generally slower than in the rest of the world where mobile payments have thrived in places where people have little or no access to traditional banking services. David noted how some of the CBDC innovators are motivated by existing friction in their current financial infrastructure.
“They’re trying to leapfrog certain types of technologies to modernize their broader payments and financial ecosystem,” he said. “[The US already has] a pretty robust electronic payments ecosystem. For more developed economies…there’s a lot of interest and focus on this technology as a new innovation on top of existing modernization efforts.”
The lack of traction so far in Europe means that many of the continent’s leading electronic payments services are non-European businesses. Much of the ECB’s current interest in CBDCs is driven by worries around loss of ...
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