- The difficult part of central bank digital currencies is adoption, said Ashok Venkateswaran, Mastercard’s head of blockchain and digital assets for Asia Pacific.
- Consumers are “very happy with today’s type of money” – including paper money and coins. “There is insufficient justification for a CBDC,” Venkateswaran told CNBC.
- “If you just try to replace your existing domestic payment network, it won’t work. But if it is a country where the domestic payment network is not that robust, it may make sense to have a CBDC,” said Venkateswaran.
BARCELONA, SPAIN – MARCH 1: A view of the MasterCard company logo on their stand during the Mobile World Congress on March 1, 2017 in Barcelona, Spain. (Photo by Joan Cros Garcia/Corbis via Getty Images)
Joan Cros Garcia – Corbis | Corbis news | Getty Images
SINGAPORE – There is currently insufficient justification for the widespread use of central bank digital currencies, making widespread adoption of such assets “difficult,” Ashok Venkateswaran, Mastercard’s head of blockchain and digital assets for Asia Pacific, told CNBC.
“The hard part is acceptance. So if you have CBDCs in your wallet, you should have the ability to spend it anywhere – much like cash does today,” Venkateswaran said on the sidelines of the Singapore FinTech Festival on Wednesday.
A retail CBDC, the digital form of fiat currency issued by a central bank, is aimed at individuals and businesses and facilitates everyday transactions. This is different from a wholesale CBDC, which is used exclusively by central banks, commercial banks and other financial institutions to settle large interbank transactions.
The International Monetary Fund has stated that CBDCs are “a safe and cost-effective alternative” to cash, with around 60% of the world’s countries exploring CBDCs. However, according to data from the Atlantic Council, they have only adopted 11 countries, another 53 were in advanced planning stages and 46 were researching the topic as of June.
“But [building infrastructure to facilitate that] This takes a lot of time and effort in one part of the country. But many central banks today have become very innovative because they work very closely with private companies like ours to create this ecosystem,” the Asia Pacific chief said.
Even then, Venkateswaran said that consumers were so fond of using “today’s kind of money,” such as paper money and coins, that “there is no sufficient justification for a CBDC.”
Mastercard, the second-largest card network in the US, announced last week that it had completed testing of its solution in the Hong Kong Monetary Authority’s e-HKD pilot program to simulate the use of a retail CBDC like electronic Hong Kong dollars.
Hong Kong’s CBDC sandbox makes it easier to attempt to mint, distribute and issue e-HKD under the program.
A total of 16 companies from the finance, payments and technology sectors took part in the pilot project, including Mastercard. In addition to HSBC Bank and Hang Seng Bank, Mastercard’s competitor Visa also took part in the project and tested the feasibility of tokenized deposits in business-to-business payments.
Venkateswaran cited Singapore as an example where the case for CBDC for retail was not convincing enough as the city-state has a “very efficient” payment system.
Last year, IMF Deputy Managing Director Bo Li named Singapore and Thailand as the countries in Asia that have made “rapid progress” in connecting fast payment systems, thereby reducing transaction fees for cross-border payments.
“There is no reason for a retail CBDC [in Singapore] But there is a case for a wholesale CBDC for interbank settlements,” Venkateswaran said.
On Thursday, Singapore’s central bank announced that it will test live issuance and use of wholesale CBDCs starting in 2024.
During the pilot, the Monetary Authority of Singapore will work with domestic banks to test the use of wholesale CBDCs to facilitate domestic payments, Monetary Authority of Singapore chief executive Ravi Menon said.
“It really depends on the country’s needs or what problem it’s trying to solve,” Mastercard’s Venkateswaran said.
It won’t work “if you’re just trying to replace your existing domestic payment network,” he said.
“But if it is a country where the domestic payments network is not as robust, it may make sense to have a CBDC.”