World Central Banks Competing to Create Digital Money, BI Need to Be Ready?

Bittime - Bank Indonesia (BI) needs to pay close attention to the latest developments regarding central bank digital currency (CBDC). The international financial institution, Bank for International Settlements (BIS), has just released survey results showing the great interest of central banks around the world in CBDCs.

The survey, which was attended by 86 central banks, revealed that 94% of them were exploring the use of CBDC . The report entitled "Embracing Diversity, Advancing Together" details the rapid increase in CBDC experiments and pilot projects , especially those focused on use between financial institutions (wholesale).

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These findings indicate the cautious stance and diverse approaches central banks are taking in CBDC implementation and design. Some of the main motivations behind central banks' exploration of CBDCs include:

• Maintaining the role of central bank money amidst the rise of private digital currencies.
• Improving domestic payment efficiency.
• Encouraging financial inclusion.
• Improving cross-border payment systems.

CBDC Wholesale Popular, What About Retail?

The BIS survey revealed a significant increase in wholesale CBDC projects, especially in developed countries. In fact, the possibility of wholesale CBDC issuance in the next six years is now higher than retail CBDC (for the general public).

Central banks are increasing cooperation with various related parties to perfect wholesale CBDC designs. The main focus of this development includes interoperability features (ease of interaction) and programming capabilities.

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Meanwhile, for retail CBDC, more than half of the central banks surveyed are considering ownership restrictions, interoperability with existing payment systems, offline transaction capabilities, and no interest.

The BIS survey also found differences in design preferences between developed and developing countries. Developing countries tend to be more interested in using distributed ledger technology (DLT) and transaction restrictions.

Challenges and Opportunities for CBDC Implementation in Front of Our Eyes

The implementation of CBDCs presents various challenges and opportunities for central banks and the financial system as a whole. Some of them are:

Challenge:

• Security and stability: CBDCs must be designed to be secure and not easily hacked. Apart from that, CBDC also needs to be managed carefully to maintain financial system stability.
• Interoperability: CBDC needs to be able to interact with existing payment systems and other digital currencies.
• Regulation: Clear and comprehensive regulations are needed to govern CBDCs.
• Public acceptance: It is important to gain public trust and acceptance of CBDC.

Opportunity:

• Improving financial efficiency and inclusion: CBDCs can help improve financial efficiency and inclusion by providing faster, cheaper and more accessible means of payment.
• Driving innovation: CBDCs can drive innovation in the financial sector by opening up new opportunities for financial products and services.
• Strengthening financial system stability: CBDCs can help strengthen financial system stability by providing new tools to manage risk and maintain monetary stability.

BI's Important Role in Studying and Considering the Implementation of CBDC in Indonesia

BI needs to be proactive in studying and considering the implementation of CBDC in Indonesia. This is important to ensure that Indonesia is ready to face the era of financial digitalization and can take advantage of the opportunities offered by CBDC.

Several steps that BI can take include:

• Conduct in-depth research and studies on CBDC.
• Consult with relevant stakeholders.
• Develop a national strategy for CBDC implementation.
• Preparing the necessary infrastructure and regulations.

The implementation of CBDC in Indonesia needs to be done carefully and planned. BI needs to consider various aspects, including the impact on the economy, financial system stability and financial inclusion.

With careful preparation, CBDC can be a useful tool for increasing efficiency and financial inclusion in Indonesia.

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DISCLAIMER: This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.