Mastercard's Crypto Conundrum: CBDCs May Not Be Ready For Prime Time

Ashok Venkateswaran, Mastercard Inc.'s MA lead for blockchain and digital assets in Asia-Pacific, on Friday asserted the current landscape doesn't provide sufficient grounds for the widespread adoption of central bank digital currencies (CBDCs), making broad implementation challenging.

Speaking at the Singapore FinTech Festival, Venkateswaran highlighted the necessity of seamless spending capabilities for CBDCs, akin to the ease of using cash, CNBC reported.

Venkateswaran acknowledged the significant time and effort required to develop the necessary infrastructure for CBDCs.

He noted the growing innovation among central banks, partly due to their collaborations with private entities such as Mastercard, to build a supportive ecosystem.

Venkateswaran observed the prevalent comfort with the current forms of money undermines the need for CBDCs.

He mentioned Mastercard's recent participation in the Hong Kong Monetary Authority's e-HKD pilot program, which experimented with the creation, distribution and use of electronic Hong Kong dollars.

This program involved multiple companies from the finance, payment and technology sectors, including Mastercard's competitor, Visa Inc V, alongside HSBC Holdings plc HSBC and Hang Seng Bank, exploring the use of tokenized deposits for business transactions.

Venkateswaran pointed to Singapore as an example where the highly efficient payment system diminishes the need for a retail CBDC.

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He did see potential in a wholesale CBDC for interbank settlements.

This view aligned with the IMF's Deputy Managing Director Bo Li's observation of Singapore and Thailand making significant strides in connecting fast payment systems to reduce cross-border transaction fees.

The Monetary Authority of Singapore, according to its Managing Director Ravi Menon, plans to initiate a pilot in 2024 for the live issuance and use of wholesale CBDCs, aiming to test their application in domestic payments.

Venkateswaran emphasized the decision to adopt a CBDC should hinge on the specific needs and challenges of a country.

Simply replacing an existing domestic payment network with a CBDC may not be effective, but in scenarios where the domestic payment infrastructure is less robust, a CBDC could be a viable solution.

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