BNM (Bank Negara Malaysia) has joined a growing list of central banks that are exploring the benefits and risks associated with CBDC (central bank digital currency) issuance.
In an article featured in its annual report, BNM says it does not have any immediate plans to issue a CBDC, but that it will “actively” assess the potential value proposition of a CBDC in light of developments in the digital assets and payments space.
BNM says key policy decisions on CBDC will be guided by clear benefits to Malaysia as a whole, while ensuring that the associated risks arising from CBDC issuance, particularly financial stability risks, are effectively managed.
According to the central bank, CBDC issuance should complement existing payment instruments including physical cash to ensure that all Malaysians have continued access to safe and efficient payment solutions.
“We will also actively monitor the trend of key indicators with direct impact to our mandates, which may provide useful data points for us to evaluate the merits of CBDC issuance,” BNM said.
As part of its efforts to enhance understanding of the associated risks and policy implications of a CBDC, BNM is actively building internal capacity to support informed decisions on CBDC issuance including by conducting a PoCs (proofs of concept).
Other efforts include monitoring the level of physical cash usage in Malaysia, the extent to which privately issued digital assets are used for payments in Malaysia, and the extent to which CBDC is being used to facilitate cross-border trade, BNM said.
In its annual report, BNM said existing monetary and financial policy tools have remained effective in safeguarding monetary and financial stability, and that domestic payment systems continue to operate safely and efficiently to support the needs of the economy and allow real-time digital payments.
Several international central banks including the PBOC (People’s Bank of China), BOJ (Bank of Japan) and Bank of Thailand are either exploring or testing their digital currencies.
In January, the BIS (Bank of International Settlements) published a report indicating that central banks representing 20 percent of the world’s population are likely to issue a general purpose CBDC in the next three years.
Based on a survey of 65 central banks, the report indicated that most central banks have continued to explore CBDCs despite disruptions caused by the Covid-19 pandemic.