Related Fitch Ratings Content: Central Bank Digital Currencies: Opportunities, Risk and Disruption
Fitch Ratings-Hong Kong/London-17 May 2021: The broader adoption of general-purpose central bank digital currencies (CBDCs) will present authorities with trade-offs between the associated risks and benefits, says Fitch Ratings.
The key benefits of retail CBDCs lie in their potential to enhance authority-backed cashless payments with innovations in step with the wider digitalisation of society. For central banks in some emerging markets, a key driver for researching CBDCs is the opportunity to bring underbanked communities into the financial system, and improve the cost, speed and resilience of payments.
Some advocates see CBDCs as a way of addressing challenges presented by the declining use of cash. The rise of digital payment systems, which have strong network effects, can create oligopolies among payment-system providers, often from the private sector. Widespread use of CBDCs could erode these providers’ control over payments-related data and improve central banks’ capacity to track financial transaction data, aiding the prevention of financial crime. However, if CBDCs offer less privacy than cash, or severely cap amounts held in electronic wallets, some may be deterred from using them.
