As per the chief of Singapore’s central bank, private cryptocurrencies that fail the fundamental tests of financial services will eventually be phased out of the monetary system.
Menon stated at the Hong Kong Monetary Authority-Bank for International Settlements event during a panel discussion on the Future of Monetary System that private digital coins have miserably failed the test of money due to their inability to retain value. Individuals do not invest their life savings in such items. Individuals buy and sell these items for quick cash.
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Private cryptocurrencies, which consist of native digital tokens, fail to satisfy that criterion; therefore, he believes they will eventually vanish from the market.
Menon stated that regulators are progressing towards a stablecoin system that is entirely backed by cash or high-quality government securities, enabling them to function similarly to narrow money. Its beauty is that it exists in token form and can be implemented in a wide range of novel ways.
A senior central banker in India, meanwhile, believes that digital currencies issued by central banks will be more successful if they satisfy unfulfilled user needs and are implemented utilizing readily available infrastructure and technology.
Data confidentiality is a concern. During the same panel discussion, M. Rajeshwar Rao, a deputy governor at the Reserve Bank of India, emphasized the critical nature of ensuring cybersecurity and resilience in order to establish CBDC as reliable as physical currency. Facilitation of offline transactions is another area of focus for the regulator.
There are currently approximately 2.75 million participants in the CBDC pilot programme, of which the RBI is one of a handful of central banks to have done so. Regarding interbank money market transactions, Rao believes that the central bank digital currency could be further expanded.
As of now, CBDCs operate on a bilateral level; moving forward, more consideration must be given to the multilateral implementation, according to Rao.