Bank of International Settlements (BIS), the top governing institution owned by global central banks, shares its views on central bank digital currencies (CBDCs) and how they can raise the competition bar in the digital payments market.
In a report accessed by The Globe and Mail on Wednesday, March 31st, BIS said that the inclusion of CBDCs in the global financial system can “spark a new wave” with non-bank retail players creating a new storm in the payments sector.
The BIs statement comes as top central banks worldwide have accelerated their CBDC developments citing massive competition from public cryptocurrencies like Bitcoin and other digital assets.
During his latest speech in Basel, BIS General Manager Augstin Carstens said:
“One goal is to build an infrastructure that allows for more competition, which may mean more payment providers. One outcome is that flood of new players can disrupt markets,” he said.
The Dominance of Private Players
One of the major concerns for the regulatory bodies is the dominance of private players. In 2019, Facebook announced the launch of its Libra stablecoin, a type of digital assets aimed at avoiding the volatility of public cryptocurrencies like Bitcoin.
However, Facebook’s Libra – now renamed as Diem – faced massive backlash from regulators worldwide. Carstens said that the prospects of billions of Facebook users using its Diem stable coin hasn’t gone well central banks citing potential risks to global financial stability and their control over monetary policies.
He further adds that big-tech services can dominate a huge sector thereby stifling competition while undermining users data protection. Facebook’s recent issues with handling data privacy has spoofed governments worldwide and has put the company in a bad spotlight.
The latest BIS report comes after the Chinese central bank asked for global rules on the functioning of CBDCs ensuring fair play across major economies.
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