Aa panel of central bank leaders on Tuesday discussed the evolving landscape of Central Bank Digital Currencies (CBDC) at Swift International Banking Operations Seminar (Sibos) in Beijing.
Representatives from China, the Bahamas, Kazakhstan and Europe each addressed the nuances of this burgeoning subgroup of the financial technology sector, according to Finextra.
The big takeaway: A more complete ecosystem is needed for widespread adoption of CBDCs to become a reality.
For Changhun Mu from China’s Digital Currency Institute, improving the legal environment is necessary in order to properly integrate the CBDC or eCNY (digital yuan or digital renminbi) and raise public awareness.
“Let every participant in the market understand what you are doing, what your products are, and what kind of incentives you can provide,” he said. “Then we can make the whole ecosystem for the market.”
Mu also highlighted China’s tiered wallet system for the digital yuan, which allows users to open a basic wallet with just a phone number. This system balances privacy and anti-money laundering (AML) efforts, with caps on wallet balances to prevent illicit activity. Mu stressed the importance of AI and big data technologies in securing transactions and protecting user privacy.
Evelien Witlox of the European Central Bank outlined progress on the Digital Euro, which has not yet been officially launched but is currently in the development and exploration phases.
Privacy concerns remain at the forefront of the design. In order for it to be structured for retail use, with both online and offline functionalities, central bankers want to ensure that online transactions would be anonymized once settled by the central bank.
Offline transactions, meanwhile, would resemble the privacy level of cash exchanges.
Witlox emphasized that stakeholder feedback and ongoing research are crucial as the Digital Euro moves toward standardization.
Henry Campell of the Central Bank of the Bahamas, shared insights on the Digital Sand Dollar—the world’s first fully deployed CBDC.
The coin, which launched four years ago this month, made the Bahamas a pioneer in the field of digital currency.
Currently in limited production, the Sand Dollar is expected to be fully operational by 2025 and integrated into tax management, decentralized finance (DeFi), and cross-border payments. Campell noted that the CBDC is reducing the costs and risks associated with cash and increasing circulation.
Assel Marchenko from the National Bank of Kazakhstan focused on curbing corruption, enhancing cross-border payments, and integrating with DeFi. Transparency in public spending is a priority, with the CBDC providing citizens with insights into the use of public funds.
Marchenko predicted that CBDCs will gain global traction due to their interoperability and efficiency in facilitating cross-border transactions.
The panel concluded with advice for central banks: Collaborate closely with private sector entities and develop clear business strategies in order to foster adoption.