Hungary’s central bank sees no rush in launching CBDCs

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The Hungarian central bank is adopting a steady approach toward launching a central bank digital currency (CBDC), having failed to see an “imminent need” for the offering.

Aniko Szombati, Chief Digital Officer of the Magyar Nemzeti Bank (MNB), revealed during a meeting hosted by the Official Monetary and Financial Institutions Forum (OMFIF) that retail CBDCs would not have a serious impact on the country’s financial system. Szombati’s comments pale in comparison to the digital euro pilots spearheaded by the European Union, of which Hungary is a member state.

“For the moment, we don’t see any imminent need for large-scale retail CBDC to be introduced,” said Szombati. “In considering CBDC, you first have to identify your motivation based on either severe market failure or a very strong policy objective.”

Szombati disclosed to conference attendees that despite the lack of motivation from banking regulators, a retail CBDC could offer the perks of financial inclusion, as 13% of Hungarians do not have bank accounts. She added that a CBDC has the potential to foster healthy competition among different payment service providers in the country.

The chief digital officer disclosed that Hungary will keep an eye on technological developments in the industry to “remain at the forefront of CBDC research.” The central bank intends to achieve its ambitions via pilots and seeking public opinion on the matter.

As proof, the central bank published a book on CBDCs with details on cash flow impacts, financial stability, and monetary policy. The book, titled “At the dawn of a new age – Money in the 21st Century,” expressed concerns over a botched CBDC launch that could trigger commercial bank disintermediation and affect their ability to lend to customers.

Hungary is yet to formally adopt the euro as its official currency, but there are multiple reports that it will be introduced as a parallel currency in select cities. The continuous decline of the local foreign currency may hasten its adoption of the euro and the incoming digital euro that could be launched in 2026.

Slamming the breaks for CBDCs

While other countries are moving towards the launch of CBDCs, a handful of countries have turned their backs away from the offering, citing incompatibility with the realities of their financial system.

In the U.S., lawmakers are staunchly opposed to CBDCs, describing them as a tool for state surveillance to invade citizens’ privacy. Some state legislatures have passed bills preventing the Federal Reserve from experimenting with CBDCs in the state and agencies from interacting with all forms of a digital dollar.

Countries like India opt for a slow-and-steady approach to avoid tipping the delicate balance of their local payments ecosystem.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

Watch: Blockchain provides perfect foundation for CBDC