CBDCs could be instrumental in improving cross border trade flows, Ajay Banga stated
Mastercard CEO, Ajay Banga, has stated that cryptocurrencies like Bitcoin cannot function as an inclusive currency for the unbanked due to, what he perceives, Bitcoin’s increased susceptibility to market volatility.
In the Fortune Global Forum 2020, being held virtually, Banga explained that while Mastercard is attempting to get more than 1 billion people connected to the banking system, Bitcoin’s volatility as witnessed in its value swinging from less than $5,000 in March, to nearly $14,000 this week, can scare people.
“Can you imagine someone who is financially excluded trading in a way to get included through a currency that could cost the equivalent of two Coca-Cola bottles today and 21 tomorrow? That’s not a way to get them [included]. That’s a way to make them scared of the financial system,” he explained.
Banga’s attitude towards cryptocurrencies is not new. In 2017, he called them non-government mandated junk and even compared them to snakes in 2018, adding that cryptocurrencies don’t deserve to be a medium of exchange.
Cryptocurrency supporters have argued that the low cost of using digital currencies and the increasing acceptance as a mode of transactions could be useful in connecting people to the financial system. In fact, CoinDCX CEO, Sumit Gupta, proposed using digital currencies as a “panacea for the unbanked” as it gave access to funds and transactions without the necessity of setting up a specific banking infrastructure.
The CEO explained that he is not a fan of the anonymity offered by cryptocurrencies adding that the lack of knowledge on who is transacting is concerning. “I am not a believer in the volatility or, for that matter, the absence of transparency in who is the person who’s involved with that currency. So, that’s why central bank digital currencies, we’re believers in,” he stated.
With a significant patent library dedicated to CBDCs, Mastercard CEO’s positive attitude towards them is not surprising. Sovereign digital currencies provide the stability of the fiat currency with the benefits of cryptocurrency.
“Fiat currencies, if they were to go digital, would they be helpful in cross-border trade flows and improving the efficiency of those—yes for sure,” Banga stated. However, financial inclusion is a very different thing, he pointed out.
Putting its money where its mouth is, the CEO confirmed that Mastercard has “invested a considerable amount of money” in CBDCs. “Today, we’re one of the largest patent holders in the space of central bank digital currencies,” he added.
Written by Harshini Nag