CBDCs To Usher In A Cashless Future, Overthrowing Traditional Banking: Royal Bank of Canada

The Royal Bank of Canada (RBC) has released a report on the evolving landscape of central bank digital currencies (CBDCs), that underscores the increasing global shift towards electronic payments as traditional cash usage wanes.

This trend has prompted numerous governments to consider introducing digital versions of their national currencies.

CBDCs, in theory, promise quicker and more cost-effective transactions. They also present an opportunity to integrate individuals currently outside the conventional banking framework, potentially reducing settlement risks and delays in international trade.

However, despite the growing enthusiasm around CBDCs, RBC raises concerns about security, privacy, and governance.

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The RBC also believes that rallying the required political support for a robust push toward a digital dollar could be a daunting task.

The report suggests that the Federal Reserve is more likely to prioritize gradual technological advancements rather than a bold overhaul of the payment infrastructure.

The bottom line, as per RBC, is that commercial bank accounts and tangible cash will remain central to the U.S. financial system for the foreseeable future.

The report also highlights a notable trend: while cash remains a dominant payment method, its popularity seems to be diminishing. Surveys indicate a growing preference for electronic payments worldwide.

Over 70% of participants from diverse countries, including Sweden and South Korea, expressed a desire to transition to cashless systems.

The challenges associated with producing, distributing, and combating counterfeit currency further bolster the case for CBDCs.

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The RBC report also delves into the intricacies of CBDCs, emphasizing that they are distinct from cryptocurrencies. While cryptocurrencies like Bitcoin operate without institutional control, CBDCs remain fiat money, regulated by central banks.

The report also touches upon the experience of China, one of the frontrunners in CBDC implementation. China's digital yuan, or e-CNY, has seen limited adoption, with less than 0.2% of cash transitioning to the digital format.

The dominance of private-sector mobile payments in China, which have been in place for nearly two decades, poses a significant challenge for the e-CNY.

In conclusion, the RBC report suggests that while CBDCs will likely gain traction in various countries, their integration will be evolutionary rather than revolutionary.

The Federal Reserve, in particular, is expected to tread cautiously, emphasizing incremental technological advancements.

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