Central banks warm up to digital currency as crypto freezes over

MAS one of those beyond exploration stage in testing digital national currencies

- Ovais Subhani

The global implosion of cryptocurrencies was instructive not only for investors, but it may also have made central banks more determined to offer a state-backed digital alternative to paper money.

The number of central banks studying the feasibility of a digital currency that consumers and retailers can use has reached 105, representing more than 95 per cent of the global economy, according to the US think-tank Atlantic Council.

The Monetary Authority of Singapore (MAS) last week became one of those central banks that have gone beyond the exploration stage and are now testing a digital version of the national currency under pilot programmes. But a central bank digital

currency (CBDC) that Singaporeans can use to shop, wine and dine is unlikely to become legal tender any time soon. Central banks, including the

MAS, are in no rush to issue a retail CBDC. Meanwhile, cryptocurrencies, including stablecoins, have so far failed to serve as money, which by definition is a medium of exchange as well as a store of value. Also, it is unclear what

compelling benefits a digital currency may offer to users that they do not already enjoy. Electronic payments in most

advanced economies, including Singapore, are pervasive, with an increasing number of households and businesses transacting digitally in a fast, secure and seamless manner. A CBDC becomes viable only if it speeds up the payment process and makes transactions more secure and cheaper MAS, for instance, envisages a retail CBDC to ensure the minimum standards required of payments, such as in terms of safety, speed, convenience and fees. MAS thus sees the retail CBDC system as a common and open back-end platform that is fully interoperable with other existing payment systems. But feasibility studies and pilot