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Why are financial firms involving themselves in CBDC trials?

From the Ant Group to Accenture – the corporate world is more interested in CBDCs than ever before

In the changing landscape of the international monetary system with blockchain-powered, open-source, and decentralised initiatives, central banks are re-evaluating how best to serve their citizens and their interests in both the domestic and international domains.

These developments lead directly to Central Bank Digital Currencies – the digital representation of a country’s currency issued by the central bank to improve payment efficiency and traceability while reducing associated costs.

From China’s Digital Yuan and Sweden’s e-Krona to the possible Digital Euro and Digital Dollar, CBDCs have piqued the interest of all stakeholders of the financial world. However, the question of where fintech firms and financial organisations fit in this puzzle is still unclear.

Last month, Alibaba-affiliated fintech giant Ant group announced that it has been actively collaborating with the People’s Bank of China to facilitate the country’s Digital Yuan since 2017.

In an article in the South China Morning Post, the Ant group revealed that MYBank, the enterprise’s online bank, is one of the intermediaries to distribute the Digital Yuan. Further, Ant’s mobile app development platform is working towards creating the app consumers will use to send and receive payments using China’s CBDC.

The Ant group’s involvement in the CBDC development process is not an exception to the rule. Recently, global payment services provider Swift and multinational consultancy company Accenture published a paper on how central bank digital currencies (CBDCs) could work for cross-border payments.

The paper explores “opportunities and challenges of central bank digital currencies for international payments, sets out practical requirements for the adoption of digital currencies at scale, and outlines how SWIFT can support the financial community as new solutions are developed,” the announcement said, highlighting the future role of companies like SWIFT in making CBDCs possible.

Accenture, on the other hand, is making a mark on the CBDC-corporate partnership by collaborating with the Digital Dollar Foundation to work towards exploring the possibility of a resilient, robust, and widely adopted U.S. CBDC by conducting over five pilots in the next year.

Even companies like Mastercard and Visa are competing to take an active role in the development of CBDCs by involving themselves in trials and global policymaking for sovereign digital currencies. Mastercard also created Sandbox and invited central banks, commercial banks, and tech and advisory firms to partner with them to evaluate the suitability of CBDCs in their region.

As the popularity of CBDCs continues to grow, so will the trend of financial and fintech firms involving themselves in such projects. While the ultimate goal seems to be to find what the future for such firms looks like in a CBDC-adopted world, their contribution offers central banks the opportunity to test innovative policy responses to improve the safety and efficiency of payment systems.

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