Cecilia Skingsley, the new head of the Innovation Center at the Bank for International Settlements (BIS), has launched criticisms of central bank digital currencies (CBDC). According to the director, these coins have some worrying flaws. In this sense, Skinsley spoke especially of total interconnection, that is, the ability of CBDCs to operate with each other. The director said that central banks will need to resolve cross-border limitations before they can successfully integrate their currencies. At the same time, Skinsley highlighted the cryptocurrency market recovery seen in 2023 and said that the sector has lessons to teach governments but needs to learn from the FTX and Earth (LUNC) meltdowns and correct their failures.
BIS warns of CBDC limitations and…
Skingsley warned that efforts by central banks to push their CBDCs will face geopolitical limits, just as they are today. In an interview with Reuters this Monday (6), the director also spoke about the appreciation of cryptocurrencies at the beginning of the year. Skingsley believes that investors will gain a new perspective on CBDC and the cryptocurrency market with this recovery. “I would say that the industry will learn from these failures and create new things”, said the director. Skinsley claims that CBDCs will bring evolution to the financial system, especially in international transfers. However, she warns that CBDCs will maintain the current global division, this time according to the development of each country. In addition to technological limitations, not all countries in the world will be prepared to cooperate fully. Therefore, CBDCs will never interconnect due to cross-border limitations due to different levels of adoption. This is seen today with the few countries that have already launched their cryptocurrencies. In China, for example, CBDCs are already circulating en masse among the people and local cities. On the other hand, the Nigerian government had to impose limits on the use of cash in order to get citizens to adopt eNaira. The BIS director suggested the low acceptance of some CBDCs. The head of the Bank of England, Andrew Bailey, raised doubts about the interaction. Bailey even wondered if other countries would accept an eventual “digital libra” issued by the UK “It opens up the question of how you maintain the public policy objectives that we think are important – namely, trust in the monetary system.”
… cryptocurrencies are the key
Until the publication of this text, 11 countries have already launched a CBDC and more than 100 others are already studying this technology. Brazil is in the second group, with the launch of Real Digital scheduled for 2024. Surprisingly, in Skingsley’s view cryptocurrencies are probably the only solution to improve international payments. The move comes as the use of cash is falling globally as authorities look to retain their currency-printing powers. However, the threat of decentralized cryptocurrencies like Bitcoin (BTC), and ‘Big Tech’ companies, places limits on this arrangement. The 40% increase in BTC price last month showed the resilience of the market and the possibility for people to adopt more cryptocurrencies in the long term.