In the earliest days of crypto, banks and governments instantly discarded any talks about central bank digital currencies (CBDCs). As time went on, talks slowly began but unfortunately, had almost no room for consensus from either side.
Moving on to the present, discussions about CBDCs are reaching a state of maturity. In fact, since the last 3 years, CBDCs have been discussed many times at high-level meetings. The Bank of International Settlements (BIS) and the International Monetary Fund (IMF) have been a part of several discussions how a CBDC can be implemented in the near future.
That being said, even with the non-stop advancements in blockchain technology, mass adoption of new payment retail innovations is a nightmare. This is mainly due to the fact that the way people shop and pay and use their cards and phones is very different from country to country. Additionally, in some countries there are many preferences when it comes to fees, interest rates and anonymity.
CBDCs reaching levels of mass adoption will prove to be a challenge for all institutions
Adoption in one country will probably cause a massive amount of problems of the government and institutions. Even if successful, mass adoption on a continental or global scale is a whole different beast. While new technology might have a magnetizing appeal, history has shown that many such innovations are now forgotten because they failed to meet customer standards.
A successful CBDC adoption requires factors such as payment habits, consumer demand and local preferences to be taken into consideration. The research report for R3 by JP Koning takes an open-minded approach to how CBDC can be implemented in Brazil.
There is an apparent increase in the amounts of physical cash in the last few years. In a growing number of regions however, people are starting to lean over towards digital payment usage. If digital solutions can be implanted into the already existing financial market infrastructure, this can open the way for many retail-level payment innovation advancements.
If the approach towards CBDCs is taken with responsibility and very carefully planned architecture, central banks will be able to perfectly serve niches that are currently very poorly addressed by the private sector. Central Banks will also be able to fill the gap by the inevitable paper decline in the steadily-increasing digital payment volume.
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