Central Bank digital currencies to decide future of money
The Central Bank (CB) will roll out a national digital currency by the end of the year with the aim of modernising the country’s financial transactions and regulatory framework, a senior official disclosed to a parliamentary committee recently.
The initiative to introduce both ‘Lanka Pay’ and ‘Central Bank Digital Currencies’ (CBDC) is already in progress, a high official of the CB informed the committee..
In the process of introducing CBDC, it is essential to integrate Real-Time Gross Settlement (RTGS), Common Electronic Funds Transfer Switch (CEFTS), payment cards QR payment platform (Lanka QR) and the Government Digital Payment Platforms.
CB digital currencies can improve payment systems as well as financial inclusion—if they are appropriately designed. If not, they could pose risks, IMF sources revealed.
While not all countries may see an immediate case to deploy CBDC, many countries are exploring CBDCs so they will have the option to introduce one in the future if it becomes pertinent for them.
Benefits are more likely to come in time, following the policies pursued by countries and the private sector’s response, as well as the evolution of technology, International Monetary Fund (IMF) stated.
CB officials explained at a recent meeting of the Parliament’s Ways and Means Committee the current state of online payments in Sri Lanka and the challenges posed by the lack of a comprehensive financial registry, which leaves 45 per cent of transactions unregulated.
The CB has taken the initial step towards implementing the digital rupee through the Real-Time Gross Settlement (RTGS) system.
The digital rupee can be issued as either wholesale or retail currency, but the presence of the RTGS system renders wholesale currency unnecessary.
Therefore, the focus is on issuing the digital rupee as a retail currency pursued by countries and the private sector’s response, as well as the evolution of technology.
It is currently studying the security aspects of customer-presented QR codes. In this context, there are two types of QR codes: merchant-presented and customer-presented.
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