Mastercard says widespread adoption of central bank digital currencies is ‘difficult’

SINGAPORE – There is little justification for the widespread use of central bank digital currencies at the moment, making widespread adoption of such assets “difficult,” Ashok Venkateswaran, Mastercard’s head of blockchain and digital assets for the Asia-Pacific region, told CNBC.

“The hard part is adoption. So, if you have CBDCs in your wallet, you should have the ability to spend them anywhere you want — which is very similar to cash today,” Venkateswaran said on the sidelines of the Singapore Fintech Festival on Wednesday.

Retail CBDC, the digital form of fiat currency issued by a central bank, meets the needs of individuals and businesses, facilitating everyday transactions. This differs from wholesale CBDC which is used exclusively by central banks, commercial banks and other financial institutions to settle large value interbank transactions.

The International Monetary Fund said that central bank digital currencies are a “safe and low-cost alternative” to cash, with nearly 60% of the world’s countries exploring CBDCs. However, only 11 countries have adopted it, with an additional 53 countries in advanced planning stages and 46 countries looking into the topic as of June, according to data from the Organization for Economic Co-operation and Development. Atlantic Council.

“but [building infrastructure to facilitate that] It takes a lot of time and effort on the part of the state to do this. “But a lot of central banks nowadays have become very innovative because they work very closely with private companies like ours, to create this ecosystem.”

Even then, Venkateswaran said, consumers are “so comfortable using the existing type of money” such as paper money and coins that “there is not enough justification for having a central bank digital currency.”

Mastercard, the second largest card network in the United States, He said last week It has completed testing of its solution at the Hong Kong Monetary Authority HKD electronic pilot program To simulate the use of retail central bank digital currencies such as the e-Hong Kong dollar.

Hong Kong CBDC Sandbox It facilitates the experience of minting, distributing and spending electronic HKD within the program.

A total of 16 companies from various financial, payments and technology sectors, including MasterCard, participated in the pilot program. MasterCard competitor Visa was also involved In the project alongside HSBC Bank and Hang Seng Bank, to test the feasibility of tokenized deposits in business-to-business payments.

Venkateswaran cited Singapore as an example where the case for retail CBDCs is not convincing enough because the city-state has a “very efficient” payments system.

Last year, IMF Deputy Director General Bo Li Named Singapore and Thailand Such as countries in Asia that have made “rapid progress” by connecting fast payment systems, thus lowering transaction fees for cross-border payments.

“There is no reason to issue a retail CBDC [in Singapore] “But there is a case for issuing a wholesale central bank digital currency for interbank settlements,” Venkateswaran said.

Singapore’s central bank announced on Thursday that it will trial the direct issuance and wholesale use of CBDCs from 2024.

During the pilot, the Monetary Authority of Singapore will collaborate with local banks to test the use of wholesale central bank digital currencies to facilitate local payments, said Ravi Menon, managing director of the Monetary Authority of Singapore.

Mastercard’s Venkateswaran said it really depends on the need of the country or the problem they are trying to solve.

It won’t work “if you’re just trying to replace your existing local payment network,” he said.

“But if it’s a country where the local payment network isn’t strong, it might make sense to have a central bank digital currency.”