In Sibos, central bankers tout broader adoption of CBDCs

Central bank leaders discussed the evolving landscape of central bank digital currencies (CBDCs) at the Sibos conference in Beijing on Tuesday.

Representatives from China, the Bahamas, Kazakhstan and Europe each discussed the nuances of this growing subgroup of the fintech sector, according to Finextra.

The big takeaway: A more comprehensive ecosystem is needed for widespread adoption of CBDCs to become a reality.

For Changhun Mu of the Digital Money Institute of China, improving the legal environment is necessary in order to properly integrate CBDC or eCNY (digital yuan or digital renminbi) and raise public awareness.

“Let everyone in the market understand what you do, what your products are and what kind of incentives you can offer,” he said. “We can then create the whole ecosystem for the market.”

Mu also highlighted China’s tiered wallet system for the digital yuan, which allows users to open a basic wallet with just a phone number. This system balances privacy and anti-money laundering (AML) efforts, with caps on wallet balances to prevent illicit activity. Mu highlighted the importance of AI and big data technologies to secure transactions and protect user privacy.

Evelien Witlox, from the European Central Bank, presented progress on the digital euro, which has not yet been officially launched but is currently in the development and exploration phase.

Privacy concerns remain at the forefront of design. In order for it to be structured for retail use, with both online and offline functionality, central bankers want to ensure that online transactions will be anonymized once settled by the central bank.

Offline transactions, on the other hand, would resemble the level of privacy of cash exchanges.

Witlox stressed that stakeholder feedback and ongoing research are crucial as the digital euro moves towards standardization.

Henry Campell from the Central Bank of the Bahamas shared his views on the Digital Sand Dollar, the world’s first fully deployed CBDC.

The coin, launched four years ago this month, made the Bahamas a pioneer in the digital currency space.

Currently in limited production, the Sand Dollar is expected to be fully operational by 2025 and integrated with tax management, decentralized finance (DeFi), and cross-border payments. Campell noted that CBDC reduces costs and risks associated with cash and increases circulation.

Assel Marchenko of the National Bank of Kazakhstan focused on fighting corruption, improving cross-border payments and integrating with DeFi. Transparency of public spending is a priority, with the CBDC providing citizens with insight into the use of public funds.

Marchenko predicted that CBDCs would gain traction globally due to their interoperability and effectiveness in facilitating cross-border transactions.

The panel concluded with advice to central banks: work closely with private sector entities and develop clear business strategies to drive their adoption.