Blockchain: Is it a hype or a hoax?  45

Table 1.2 (Continued)  Potential benefits and challenges

CBDC benefits

CBDC challenges

Additional insights

Countering new digital currencies:

CDBC can provide healthy, safe

government-backed digital currencies

that can create competition against

privately issued digital currencies. It can

also provide more regulated digital

currency markets and reduce/prevent

the adoption of privately issues

currencies that may be difficult to

regulate.

Costs and risks to the central bank: central banks would have

to bear the costs of offering CBDC and could pose risks to

their reputation if there are any glitches, system failure,

instability or unavailability of the platform offering CBDC.

Offering full-fledged CBDC would require central banks to

invest and further maintain the whole digital ecosystem of

CBDC that includes DLT, front-end wallets, monitoring

transactions, governance and policies supporting cyber, KYC,

AML etc., to name a few.

I think governments need to take a

collaborative approach. The

government should have tight

regulations and establish partnerships

with tech companies, and financial

banks to run part of the CBDC

ecosystem. I also think CBDC is the

way to go forward with digital

currencies that are guaranteed by the

government like existing fiat

currencies, e.g. dollar and pound.

Support Distributed Ledger Technology

(DLT): Some central banks have a view

that the adoption of DLT-based CBDC

will proliferate the DLT-based asset

market as well. CBDC adoption will

improve the automated supply chain

further through the use of smart

contracts, cross-border payments and

digital asset transfer.

Same as the above point on establishing, maintaining, and

supporting the CBDC ecosystem by the Government.

Same point as above.

Monetary policy: Academics and

economists have a view that CDBC

adoption can enhance the transmission

of monetary policy. Monetary policies

can be quickly implemented digitally to

provide an economic response to

macroeconomic events or pandemics

like COVID-19.

Existing financial stakeholders like banks and intermediaries

need to adopt the policies. The central government also need

to take feedback from the financial market key stakeholders

before enforcing monetary policies. There can also be a risk

of political influence if the central government can enforce

the policies without taking feedback from stakeholders in the

financial industry.

There needs to be tight governance to

adopt monetary policies without any

political interference.