As countries worldwide step up CBDC efforts legislators are divided over the risks posed by the new digital currencies.
Major economy Switzerland has completed a successful trial to integrate CBDCs into the country’s existing banking system on the same day that UK Peers issued a scathing report on proposals for a digital pound backed by the country’s central bank.
The Swiss National Bank said the test, which was completed with help from major banks including Citi group, Goldman Sachs and Credit Suisse, “looks toward a future in which more financial assets are tokenized and financial infrastructures run on Distributed Ledger Technology.”
Switzerland’s central bank is not alone in its assessment that CBDCs and other tokenized assets will form the basis of a future banking system.
Earlier this year the Bank of America published a report which labelled the adoption of CBDCs “inevitable,” because of the declining role of cash in national economies and the private sector’s increasing use of blockchain technology.
Over 90 countries worldwide have begun research and development for their own CBDCs, with nine digital currencies launched to date. In the UK, the Bank of England which has launched a joint consultation on the role of a digital pound with the Treasury.
However, UK legislators are concerned that crucial details must be ironed out ahead of any future roll out.
A damning report by the House of Lords Economic Affairs Committee warned that a digital currency backed by the UK’s central bank could allow state surveillance of people’s spending, create financial instability and prompt an increase in central bank power.
Peers even argued that if a CBDC is seen as an ultra secure alternative to bank deposits it could increase the risk of a bank run during times of economic hardship, harming economic stability.