As digital business is increasing across many industries, central banks are now also adapting the architecture of money. However, some countries are taking this step sooner than others writes Amit Ghosh, Head of Asia Pacific at R3.
Digital money powered by blockchain has matured rapidly in just a few short years, but the ultimate sign of graduation from the margins into the mainstream is perhaps the way that central banks are now embracing the technology. This evolution is in the process of transforming the way money works for businesses ranging from the largest financial institutions to SMEs and beyond.
APAC is leading by example when it comes to embracing new technology. Countries across Asia-Pacific have drawn global attention due to their innovative applications of cutting-edge technology. APAC’s success with central bank digital currencies (CBDCs) is a key example. Countries which have historically been at the forefront of currency developments, such as the US and the UK are no longer leading the charge. Desire to protect longstanding currencies has led to a ‘regulation first’ not ‘innovation first’ approach for many.
The US Fed, the Bank of England, the Bank of Japan and the European Central Bank are all currently exploring the technology. Meanwhile, the Bank for International Settlements (BIS), the so-called “central banks’ central bank” has been discussing CBDCs at length, and recently forecasted that amid the current global pandemic, contaminated bills may be the catalyst for central banks to deliver a digital cash alternative for payments.
So why else are central banks, the heart of the economic establishment, so interested in a technology with such radical and revolutionary roots?