The International Monetary Fund (IMF) recently released a central bank digital currency report showing that as of July this year, about 97 countries around the world have central bank digital currencies (CBDC) in the research or development stage, but only two countries, Nigeria and the Bahamas officially launched CBDCs
IMF statistics reveal that nearly half of the world has researched CBDC. Li Lihui, former Governor of the Bank of China and Head of the blockchain research working group of the Internet Finance Association of China, also revealed that most experts and scholars in the industry believe that there are multiple advantages for the central bank to launch a CBDC.
First, a central bank can save the cost of cash circulation, especially in remote and vast areas, and in cross-border retail payment scenarios, CBDC can effectively reduce the cost of cash circulation. At the same time, because CBDC is more difficult to counterfeit, it can help deter counterfeit currency. Second, CBDC can strengthen the public attributes of the payment system and promote an inclusive financial environment. CBDC can provide the public with a payment instrument with high security and good liquidity, and it does not require a commercial bank account or even a commercial bank to act as an intermediary.
Third, CBDC can provide an end-to-end and reliable payment tool for digital asset transactions. In the future market of digital assets, the application of smart contract technology will be able to automatically execute the transfer of value in accordance with the agreed commercial terms and adapted laws. Fourth, CBDC can strengthen the transmission mechanism of monetary policy. Especially in the phase of prolonged economic recession, CBDC can be very convenient to implement special interest rate policies.
Although CBDCs can solve many problems, there are also reasons behind the fact that only two countries have officially launched CBDCs so far. There are potential risks for central banks to launch CBDC. In the same broadcast, Li Lihui said that there are three possible problems with CBDC.
One is that CBDC may weaken the initial credit capacity and profitability of commercial banks. Public deposits may flow from commercial banks to central banks, forcing commercial banks to raise interest rates to obtain funds to retain customers. Second, CBDC is more likely to trigger systemic financial risks. When there is volatility in the financial market, commercial banks with lower credit ratings may experience a run on deposits in legal tender that is difficult to control and is prone to chain effects. Third, the central bank has the potential to regulate the money market more directly, but, at the same time, the central bank may also assume more direct responsibility, the central bank’s balance sheet will expand significantly, but in the event of an economic crisis, the central bank will have to provide more liquidity support to commercial banks. On top of that, not only China but even other countries are facing high concurrent demand for mega-market retail levels of fiat digital currencies. At present, the supporting technology behind the CBDC cannot meet the high demand.
CBDC requires consensus mechanisms, distributed ledgers, cryptographic algorithms, peer-to-peer networks and other technical support. At present, those who can skillfully apply related technologies are blockchain companies that have developed digital currencies. As a leading global blockchain company, ACU Group has developed its own blockchain technology, launched its own cryptocurrency ACU, and is committed to being one of the major players and contributors in various fields.
Currently, the ACU Group is applying its own blockchain technology to the finance-related ecosystem, including payments, exchange, digital banking and other quality blockchain projects incubation. To help solve the challenges encountered by central banks around the world in digital currencies and blockchain, ACU has especially launched a new system that can convert ACU directly with local legal currencies to complete global circulation.
In Malaysia, ACU launched ACUM, an electronic currency linked to Malaysia’s legal tender, Malaysian Ringit (MYR). Using ACUM to circulate in the global system not only realizes the exchange between the electronic currency ACU, ACUM, and MYR, reducing exchange losses and exchange costs for users, but also directly incorporates MYR into the ACU global circulation system, realizing the global circulation of RM and guaranteeing RM’s share in ACU can be linked to gold assets, legal tender …… with asset backing according to local international trading demand, and asset pegging according to the demand of central banks. With ACU’s stable global network system and years of blockchain experience, central banks can easily achieve technical upgrades to achieve the free conversion of legal tender and digital money to complete global financial transactions in the ACU network.
According to an IMF report, at present, there are still 2/3 of African countries which have not yet begun research into CBDC. In view of the weak financial foundation of African countries, ACU Group is helping African countries to develop CBDC with the help of the Cross-Border Support Program to rapidly improve the level of financial technology in the region.