Central bank digital currencies (CBDC) have recently witnessed increased interest from governments. Last June, the Monetary Authority of Singapore (MAS) announced a global competition to find solutions for retail CBDCs. The original deadline for submissions was 23rd July, but MAS extended it to 30th July.
The competition aims to develop innovative solutions for retail CBDCs to improve payment efficiency and expand access to financial services. Entrants are encouraged to submit proposals to address 12 problematic issues centred around three key areas:
According to MAS, retail CBDCs have the potential to improve payment efficiency, provide new financial tools to the public and support countries’ aspirations to digitalise their economies. However, the technology behind retail CBDC solutions must meet several public policy objectives. The proposed solution must be cost-effective and meet current and anticipated future payment needs of consumers. It must be accessible to the full spectrum of users, including low-income households and those who are less sophisticated in technology. The CBDC solution should facilitate the sustainability and integrity of the financial system and support monetary and financial stability.
A recent report issued by the Bank for International Settlements (BIS) said CBDCs could be an extension to a competitive monetary system. Kanv Pandit, Group Managing Director, Asia Pacific, Banking Solutions, FIS, noted that “moving money across borders and converting those payments into foreign currencies can be both complex and costly. Currently, cross-border payments involve bridging the closed loops of multiple currencies and domestic payment systems. This, coupled with the complexities presented by the world’s many regulatory jurisdictions, means they are inherently more challenging to resolve.”
In addition, Pandit cited a host of benefits of CBDCs: they reduce costs and increase productivity for cash management and, unlike cash and private cryptocurrencies, provide a higher level of control. CBDC technologies allow for better tracking of financial activity, making such crimes as tax evasion and money laundering much more difficult.
According to Pandit, some are concerned about resolving the issue of CBDC classification in the financial ecosystem and its impact and interaction with other forms of money. “These issues need to be addressed before the digital currency gets into circulation,” he said.
“As with most new products and services banks are planning to launch, the process is methodical, and the actual implementation takes time – getting to the point of offering CBDCs to customers is a bit of a slow climb. However, it will be a game-changer once CBDCs prevail and reach mainstream use, bringing about a rapid shift to the banking and payments ecosystem”, he added.
The MAS will select 15 finalists who will receive mentorship from industry experts and access to APIX Digital Currency Sandbox for rapid prototyping of digital currency solutions. The finalists will showcase their solutions to a wide audience on Demo Day, to be held on 8th November at the Singapore Fintech Festival. Three winners will be selected, each receiving a prize of S$50,000 (~£26,700).
The Monetary Authority of Singapore (MAS) announced the launch of a global challenge for retail Central Bank Digital Currency (CBDC) solutions. FinTech companies are invited to participate and address 12 problems centred on CBDC instrumentation, distribution, and infrastructure. Although CBDC has many undeniable advantages, its classification and impact on other forms of money need to be addressed before it can be introduced in the financial system.
The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.
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