BARCELONA, SPAIN – MARCH 01: A view of the MasterCard company logo on their stand in the course of the Mobile World Congress on March 1, 2017 in Barcelona, Spain. (Photo by Joan Cros Garcia/Corbis via Getty Images)
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SINGAPORE — There is not enough justification for the widespread use of central bank digital currencies right now, which makes broad adoption of such assets “difficult,” Ashok Venkateswaran, Mastercard‘s blockchain and digital assets lead for Asia-Pacific, told CNBC.
“The difficult part is adoption. So if you may have CBDCs in your wallet, it’s best to have the flexibility so that you can spend it anywhere you wish – very much like money today,” said Venkateswaran on the sidelines of Singapore FinTech Festival on Wednesday.
A retail CBDC, which is the digital form of fiat currency issued by a central bank, caters to individuals and businesses, facilitating on a regular basis transactions. That is different from a wholesale CBDC which is used exclusively by central banks, industrial banks and other financial institutions to settle large-value interbank transactions.
The International Monetary Fund has said that CBDCs are “a protected and low-cost alternative” to money, with roughly 60% of countries on the planet exploring CBDCs. Nevertheless, only 11 countries have adopted them, with a further 53 in advanced planning stages and 46 researching the subject as of June, in accordance with data from the Atlantic Council.
“But [building infrastructure to facilitate that] takes lots of effort and time on a component of the country to try this. But lots of the central banks nowadays have gotten very revolutionary because they’re working very closely with private firms like ours, to create that ecosystem,” said the Asia-Pacific lead.
Even then, Venkateswaran said consumers are “so comfortable using today’s type of money” that “there is not enough justification to have a CBDC.”
Mastercard, the second-largest card network within the U.S., said last week it has accomplished testing of its solution within the Hong Kong Monetary Authority’s e-HKD pilot program to simulate the use of a retail CBDC similar to electronic Hong Kong dollars.
Hong Kong’s CBDC sandbox facilitates the trial of minting, distributing and spending of e-HKD throughout the program.
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A complete of 16 firms across the financial, payments and technology sectors including Mastercard participated within the pilot. Mastercard’s rival Visa also took part within the project alongside HSBC Bank and Hang Seng Bank, testing the viability of tokenized deposits in business-to-business payments.
Venkateswaran cited Singapore for instance where the case for retail CBDC is just not compelling enough because the city-state has a “very efficient” payments system.
Last yr, the IMF’s deputy managing director Bo Li named Singapore and Thailand because the countries in Asia which have made “quick progress” by connecting fast payment systems, subsequently lowering transaction fees for cross-border payments.
“There is not a reason for a retail CBDC [in Singapore] but there’s a case for a wholesale CBDC for interbank settlements,” said Venkateswaran.
On Thursday, Singapore’s central bank announced it can be piloting the live issuance and use of wholesale CBDCs from 2024.
Throughout the pilot, the Monetary Authority of Singapore will collaborate with domestic banks to check the use of wholesale CBDCs to facilitate domestic payments, said the managing director of the Monetary Authority of Singapore, Ravi Menon.
It really is dependent upon the necessity of the country or what problem they try to resolve, said Mastercard’s Venkateswaran.
It won’t work “for those who’re only trying to interchange your existing domestic payment network,” he said.
“But when it’s a rustic where the domestic payment network is just not as robust, it could make sense to have a CBDC.”