On the second day of Cebus, BIS Innovation Hub Center Head Benedikt Nolens delivered the session ‘Reality Check: How far have CBDCs come?’ moderated, and speakers explained how central bank digital currencies (CBDCs) are in various stages of development. in their countries.
The panel included Henry Campbell, manager of the Central Bank of the Bahamas; Esel Marchenko CTO, Deputy CEO at National Bank of Kazakhstan; Changhun Mu, Director General of the People’s Bank of China’s Digital Currency Institute; and Evelien Witlox, Digital Euro Project Director at the European Central Bank.
Mu emphasized a market-based approach to CBDCs, pointing out that market incentives are needed to attract acquirers and that the lack of market incentives has led to fewer traders adopting the system. Ready to adopt. He highlighted that they need to let “the money do the talking,” and let every player in the ecosystem make a profit to keep it going.
He compared Cebos to the Olympics, saying central banks cannot be players: “Cibos is like the financial Olympics, and you are the players. We, as a central bank, cannot be players. We do not play on the field. We need to make the rules, but we don’t play in the market, we should act as coaches, but not as players.
“First, we have to establish an ecosystem of eCNY and CBDC, and take a market-oriented approach. This means we have to provide incentive mechanisms and establish a complete ecosystem for CBDC. Secondly, we need to improve the legal environment and integrate CBDC or eCNY into the whole legal framework , what your products are, and what kind of incentives you can provide. Then we can create a whole ecosystem for the market.
Whitlocks detailed progress on the Digital Euro project, which is currently in the preparatory phase. This includes using currency design and stakeholder feedback to improve the CBDC. Whitlocks said the digital euro is being designed for retail use, which will include both an offline and online element to the CBDC. Their aim is to distribute the digital euro to merchants and consumers through payment service providers (PSPs) to create a digital ecosystem where it is not only being distributed by the central bank.
He highlighted that privacy is a key concern, and the digital euro is designed to ensure that it is guaranteed by transactions:
“We will have two digital euros. The first is online, where you initiate your transaction and it will be initiated through your PSP. This service provider needs to do KYC, AML, CFT, and Your data needs to be viewed for these purposes. But, once it goes to the central bank, where it will be populated, it will be kept anonymous With that, we really think we’ve built a very secure digital euro. Then we also have an offline digital euro, where you can make transactions between two devices will, and the transaction isn’t even happening over the network. This level of privacy is close to cash.”
He continued that the digital euro is currently being standardized, and they are still researching the best ways to integrate the digital euro into the ecosystem before it is ready for launch.
Campbell described the launch of a digital sand dollar platform in the Bahamas that is in limited production mode, but will be ready for use in 2025. Campbell explained how digital sand dollars are being introduced for use in tax management, decentralized finance (DeFi). ) integration, and cross-border payments.
Campbell highlighted that the digital sand dollar has seen significant adoption and is growing in circulation in the Bahamas. This is reducing the costs and risks associated with cash. He pointed out that digital sand dollars are an important tool for financial inclusion, and will improve adoption for the underbanked population.
Going back to CBDC developments in Asia, Mu explained the design of a tiered wallet system in China, with four categories of personal wallets – the lowest category of which can be opened with a user’s phone number.
The wallet doesn’t require a mainland China bank account, he said: “You just provide your mobile number to open the wallet. At least to open a privileged wallet you need to provide your identity information.” No. To strike a balance between privacy protection and illegal transactions such as money laundering, terrorist financing, or tax audits, we have a limit on the balance of the least privileged category of the four wallets. .
Mu added that personal information protection laws protect user data from telecom operators as well as commercial and central banks, but in case of suspicious or illegal activity, legal agencies are guaranteed access to the data. is Mu emphasized that maintaining personal information and anti-money laundering (AML) practices are a primary focus, and that they will use artificial intelligence (AI) and big data technologies to protect transactions. .
Marchenko said that in Kazakhstan, CBDC development aims to prevent corruption, expand cross-border payments and integrate with DeFi. Awareness is key, Marchenko added, and they need to explain to consumers that they won’t be tracking their money — they’ll only be tracking the use of public funds, so citizens know what they’re spending. Where are the taxes going?
“The first priority for us is the spending of public funds. To see that we can actually bring tangible benefits to our people, our citizens, and show how digital thinking can make it more efficient, transparent and can help reduce this potential for corruption.”
Touching on upcoming trends, Marchenko predicted that CBDCs will see increased adoption in the future due to their interoperability and ability to facilitate cross-border transactions. Whitlocks discussed how the Digital Euro will provide a platform for innovation and pave the way for a pan-European digital payment ecosystem.
Looking to the future, the panelists suggest that other countries and central banks that aim to establish CBDCs should have a clear business strategy for digital currency and should engage the private sector, such as commercial banks, telecom operators, and large corporations. should work together with .