2021 will see further clarity offered on the development of central bank digital currencies (CBDCs) but deployment is still some way off, according to Ville Sointu, head of emerging technology at Nordea.
From the conversations around whether CBDCs could be developed and what the risks and opportunities are, this year will see the actual practicalities around technical deployment begin to be addressed.
Many of these will centre around the extent of decentralisation in digital currencies and the role that blockchain technology will play.
“There’s been a lot of conversation around CBDCs over the last couple of years. It's become almost like a Rorschach test - it looks the way you want to see it,” Sointu says.
“If you talk to the blockchain people, they think CBDCs will be running on blockchains. If you talk to central banks, it couldn’t be any further away from that.”
While blockchain is generally synonymous with digital currency, there is doubt over the extent to which CBDCs will harness distributed ledger technology, given the reticence central banks may have to cede any control and influence over their currency.
These and other questions need answers in 2021, according to Sointu, with greater clarity around the actual practicalities in deployment.
“Bear in this mind that will still be far removed from deploying something for practical use, but at least we’ll have some more clarity around this, especially around the digital euro, which is close to us at Nordea,” he says.
The European Commissions and European Central Bank are currently trying to address some of the practicalities of a digital euro, in order to reach a decision over whether to start developing one later this year.