Last June, the Monetary Authority of Singapore (MAS) had announced a global competition for digital currency (CBDC) solutions for retail, and the deadline for submission of entries to this competition has now been extended to 30th July from 23rd July as was originally scheduled.
The MAS had set out this challenge for developers to come up with solutions with 3 key areas in mind which revolve around CBDC instrument, distribution, and infrastructure and the teams that competed had been given time of around a year to come up with solutions for the same which could set the tone and pathway for next-generation payments which could be through CBDCs which will in turn help in improving efficiencies, make payments faster and more reliable as well.
It is reported that central banks of more than 60 countries are in various stages of testing as the race for the launch of digital currencies has well and truly begun. But the launching of that by any bank or a set of banks is always going to be a difficult task as the current systems are not built for digital currencies. The current systems, laws, and also the entire financial and economic setup in any country are prepared only with fiat currencies in mind and so any shift towards a full digital ecosystem is likely to affect the fundamentals of the economy in the long run.
All these need to be well thought through as the digital currencies depend a lot on the digital infrastructure and any contingency should also be planned and handled quickly and professionally as it could lead to chaos in the financial system.
Kanv Pandit, Group Managing Director, Asia Pacific, Banking Solutions, FIS, commented 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.”
It is expected that the launch of digital currencies would help to cut costs in the banking system and would also make it more inclusive as it would then become very easy to make funds available even for people leaving in remote areas in each country. The advantages of using digital currencies far outweigh the disadvantages at this point which is why there is a great push from the banks in this regard.
The winners of this competition, three of them, would be awarded $50,000 each and this competition is held by MAS jointly with IMF, World Bank, ADB, and other major international financial firms.