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EBAday 2021: Do we really need CBDCs?

EBAday 2021: Do we really need CBDCs?

The highly anticipated session scheduled for day two of the upcoming EBAday 2021, titled ‘Do we really need Central Bank Digital Currencies?’ is focused on answering this precise question.

In partnership with Finextra, the Euro Banking Association’s annual conference is set to dive into the thorny questions around how CBDC can promote financial stability, financial inclusion and cross-border payments, and the role they are anticipated to play for commercial banking.

While US regulators have been more sceptical of committing to a digital currency, the UK’s Bank of England and the ECB have progressed further along their timelines and are expected to announce their plans in the coming months.

This week the Swedish central bank Riksbank, announced its project in partnership with Handelsbanken to launch an e-krona pilot. Benny Johansson, head, Nordic payments, Handelsbanken said that the partnership will provide the opportunity to “evaluate what benefits the currency may provide, as well as giving us the chance to create value for the bank, our customers and society in general.”

Despite attempting to lower expectations, the BoE’s Jon Cunliffe - who is spearheading the CBDC project - recently commented that the release of a ‘Britcoin’ is now looking more probable than ever. In Europe, the ECB has shown its desire to address concerns around privacy that a digital currency tends to arouse, in addition to busting myths around the supposed consequence of ‘abolishing cash.’

In conversation with Finextra TV, Andrew Smith, chief technology officer and co-founder of RTGS.global, recently noted that both the issue and the opportunity around CBDC comes down to use-cases.

“There is a variety of use-cases we can talk about, but they can be lumped into wholesale or retail categories. Depending on the way you want to look at CBDC or which use-cases you want to follow, you end up with different challenges, risks, complications - some technical, some economic. CBDCs are often touted as being a replacement for other payment systems that we have today. They don’t really offer any additional value and there is no additional benefit to me as an end user.”

He added that we need to consider what kind of benefit a CBDC can actually bring to the marketplace. This is because if the only added benefit being discussed is focused on speed of transaction, instant payments, instant gratification - Smith believes that this does not warrant the investment in developing a CBDC.

“If you approach it as a way of de-risking the financial service sector itself, or the way that banks hold funds, then all of a sudden you can see a massive benefit of a CBDC that is 24x7, instant, always available, which then can become an enabler for banks to carry out other processes and functions that they must deliver to their customers.”

The EBAday session ‘Do we really need Central Bank Digital Currencies?’ will be moderated by Robert Bosch, partner at Bearing Point, and will be led by the following panellists:

  • Sophia Bantanidis, head of strategy and policy, Citi Innovation Lab,
  • Marion Laboure, macro-strategist, Deutsche Bank Research and lecturer in economics and finance, Economics Faculty, Harvard University,
  • Naveen Mallela, global head of coin systems, ONYX, JP Morgan,
  • Dirk Schrade, deputy head of department payments and settlement systems, Deutsche Bundesbank.

CBDCs and stablecoins will be a core topic discussed at the Euro Banking Association and Finextra’s EBAday 2021. Running in digital format on 28-30 June for its sixteenth year, the event will welcome a host of board directors, chief executive officers and payments and technology heads from Europe’s leading banks, as well as selected fintechs and registration is now open.

 

Comments: (2)

Jeremy Light
Jeremy Light - Fourdotzero - London 09 June, 2021, 11:55Be the first to give this comment the thumbs up 0 likes

The debate needs to be clear on the "we".

"Do we, the public needs CBDCs?" is a very different question to "Do we, the financial services sector, need CBDCs?".

Kim Engman
Kim Engman - TietoEVRY Financial Services - The Nordics 09 June, 2021, 15:20Be the first to give this comment the thumbs up 0 likes

An oversight in the above, is the Nordic's largest financial services provider; TietoEVRY, has also joined the Swedish e-krona pilot.

From a vantage point of "commercial" banks, a valid question is indeed: Why CBDCs?

However, the many reports referred to above (BoE, but also BIS, Norges Bank, Riksbanken) do touch upon the opportunities for central banks and commercial banks alike - dependent on the design choices.

Regarding users, and unlike RTGS.global's Andrew Smith, I'd say there are a few advantages to CBDCs. Main one being that they'd be guaranteed (as is the case of cash) by a central bank. This is certainly one reason why central banks (with dwindling cash usage) are pursuing CBDCs.

Even still, why users (consumers and businesses alike) would embrace CBDCs, still needs further attention.

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