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Visa: Public willingness to use CBDCs is the biggest challenge

The Visa Economic Empowerment Institute (VEEI), a non-partisan center of excellence for research and public-private dialogue established by Visa, has released a research paper on central bank digital currencies (CBDCs).

In the 38-page report titled, “The art of public money: Policy considerations for central bank digital currencies,” the institute highlighted several aspects of the central bank-issued digital assets. These include the current motivations of central bankers in exploring CBDCs, policy implications of CBDCs, and risks central banks are likely to face.

The primary motivation central bankers cite for exploring CBDCs is the need to pursue several public policy objectives using a technology-focused effort.

These policy objectives include maintaining effectiveness and independence in monetary policy, increasing resilience during crisis, driving financial inclusion, encouraging competitiveness and interoperability, and continuing to provide access to central bank money.

The report notes that fulfilling one or more of these objectives has been why over 105 central banks are exploring different kinds of CBDCs, such as wholesaleretail, or even “synthetic CBDCs” that are akin to narrow bank options.

However, CBDCs still face daunting challenges, the biggest of which the VEEI notes to be a lack of public interest in using CBDCs. It cites the case of Ecuador’s CBDC, which failed after not gaining public adoption or even shaking off criticism.

“Perhaps the greatest challenge to CBDC deployment will come from the public’s willingness to use it. Inevitably, CBDCs will come up against payment solutions that the public has already come to rely on, and given that there are only a handful of CBDCs in operation, how people will respond to this new innovation is an open question,” the report stated.

Added to this are the problems of CBDCs posing a threat to the payments and financial system and cybersecurity risks, as well as the fact that their use in cross-border transactions and offline payments are still not frictionless.

Visa willing to continue being a private sector player in the CBDC dialogue

Visa is not new to CBDCs and has reiterated that it is willing to keep contributing to further their evolution. Visa has been pioneering several development efforts for CBDC, including building an in-house platform for testing CBDCs.

Per a Bloomberg report in January, the bank payment services provider partnered with fellow industry player Mastercard to offer central banks a way to test retail applications for digital currencies they might issue.

When Visa first announced the platform last year, it noted that it would allow for CBDCs and stablecoins to be interoperable. Visa’s efforts have seen it join the CBDC pilot project of countries like Brazil and Singapore.

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