Singapore Pushes Ahead with CBDCs but Do They Really Need It?

Singapore is ahead in the race to introduce CBDCs in their country and once it manages to do so, it will be the first developed country to launch CBDCs, and the launch and the after-effects would be watched very closely.

Other countries are also looking to launch their own central bank digital currencies (CBDCs) but at this time, it looks as if it might take them a few years at least to get going. Singapore and China are likely to be the next major countries to introduce them but it leads to the question of whether Singapore does indeed need them. The country is one of the most developed places as far as financial services are concerned and it had onboarded the digitalization train a long time ago. So, almost the entire population has bank accounts and all sorts of digital options for payments and other financial services. In such a situation, the CBDCs may only turn out to be a burden for the users of the country as it would present one more option for them to maintain and reconcile and track as well.

Also, unlike the private digital payment options, the CBDCs would be fully regulated, controlled, and tracked by the government which defeats the purpose under which digital assets like stablecoins and cryptos were launched. The digital assets were supposed to free the users from intermediaries and help them control their finances without the fear of each transaction being monitored, tracked, and controlled. This freedom would certainly not be available for the users of CBDCs and so this could play a huge part in the adoption or the lack of adoption of the CBDCs from the users. It is aspects like these, apart from the technical challenges, that the various authorities and central banks need to consider while they discuss digital currencies.

In a bid to curb the usage of stablecoins and cryptos, the central banks are looking towards the CBDCs as a solution but they are likely to disrupt the financial ecosystem in a much worse manner than the cryptos, if not handled carefully. It is up to each central bank to carefully consider the situation and weigh the pros and cons and also discuss with the other countries to ensure that such rollout is smooth and also welcomed by the target audience.