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Fast Bank Runs as Central Banked concern CBDCs: IBM and OMFIF Survey

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According to a report by IBM (International Business Machine) and OMFIF (Official Monetary and Financial Institutions Forum), a great number of central banked are concerned about fast CBDCs (Bank Runs and Digital Currencies), as stated by respondents of Surveys. The report about digital currency (Bitcoin) was made by surveying 23 central banks concerning retail CBDCs on their endurance and progress.

By working together, IBM and OMFIF precisely make a report on wholesale CBDC a year ago. Earlier on, they come to the result a technology called DLT (Distributed Ledger Technology) could highly streamline operations, especially RTGS (Real-Time Gross Settlements). Today, both of them have examined retail CBDCs in a somewhat different payment aspect.

According to Philip Middleton, the deputy chairman of OMFIF “The idea of retail CDBCs has progressed swiftly from being the evaluation experiment of technical specialists and philosophers to the topic of boardroom disputes centred on real, near-term improvements.

Among the 23 central bank participants of the survey, 13 participants are from advanced economics, and ten members are from emerging markets. But an unexpected thing happens that private digital currencies (Bitcoins) took central stage such as Libra. The overall reports include the comments of US Congress, BIS (Bank of International Settlements), ECB (European Central Bank), and two comments from the speech of Mark Carney, an economist and banker.

From the surveys, more than half were greatly concerned that “the challengers of private CBDC would seriously undermine the financial freedom.”

A respondent from an unknown bank stated that “there is a concern that various private digital currencies could arise in a competition to result in another similar digital currency, earn adoption, and win the emerging seigniorage. The reason for its concerning is any adoption of an alternative section of account will destroy the capability of the central bank to manage financial and monetary stability policy.”

After that, the research considered an upcoming customer CBDC of China. Also, China becomes the first central bank who issued digital currency, and people, about 1.4 billion, made mobile payments. 

The reports of IBM and OMFIF further explained that People’s Bank of China reported that the volume of the mobile transaction has increased from 1.7 billion to 61 billion, from the year 2013 to 2018, respectively. Some rumoured issuers stated that 93 per cent of transactions are made through Alipay and WeChat.

Some other surveys are also performed and their highlights include:

  • More than 70 per cent would need to made retail CBDCs available where currently cash is used
  • More than 80 per cent expresses primary financial stability concern
  • More than 80 per cent deemed their role would not change with CBDCs as a central bank
  • More than 60 per cent stated that for retail CBDCs, outsourcing functions would be necessary

Saket Sinha, Global VP of IBM, said that “The surveyed of Central banks are used in putting themselves to begin their own retail CBDCs, as the results of this report make transparent.” “Large banks and technology companies will have a major role to play as new public-private partnerships are formed to promote interoperability, create services, and extend financial inclusion.”

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