Mobile applications and payment cards have been dominating the finance market in recent weeks and officials at central banks were reported to create a digital form of cash for future transactions.
According to Quartz, cashless payments have been a growing trend in the financial market today. Companies such as Visa and Mastercard have been expanding globally along with tech companies such as Apple, China's Ant Financial, Sweden's Swish, and Kenya's M-pesa have been taking the financial market through mobile phone payments.
The report claimed that technological innovations such as these cashless payments and online loan acquisitions have urged government authorities to consider developing a digital form of cash.
It was revealed that more than a dozen countries have been piloting, researching, and have developed central bank digital currencies in response to the trend. One of the countries that have considered this option was labeled as China, reported the Bank for International Settlements (BIS).
The BIS report stated that central banks in many countries have been investigating the digital currency option and have established prototypes to test its efficacy. The said testings were to determine which among the innovative technologies and designs presented in the private sector that would be optimal for the central banks to observe on digital currencies.
It was then explained that the decision of central banks to consider the option is different from the traditional method. It was then discussed that the notes issued by the central bank were provided through a 'lender of last resort' option and would depend upon the country's financial system. It was also differentiated against digital currencies where the stability of financial institutions is made the basis for financial services.
The BIS then exclaimed that digital currencies would be more advantageous to consumers during financial crises. It explained that people could easily convert their electronic assets to cash when necessity calls for it.
It was also mentioned that this option has been considered a potential solution when the BIS assessed crisis episodes in the past. It was then highlighted that if central banks would consider digital currencies and when cash would no longer be generally accepted in the financial market, a severe financial crisis might significantly disturb retail transactions and day-to-day business operations.
It was also discussed that cashless transactions are very possible in the near future since physical cash is not detrimental in the UK, Sweden, and China. The BIS then released a report that showed the possible designs for a peer-to-peer central bank digital currency. The said report showed that Korea, Sweden, Finland, the US, and the Netherlands are the top five countries to generally capacitated to observe this feature.
