Australia, Malaysia, Singapore and South Africa launch CBDT scheme | Daily Current Affairs 2021

Australia, Malaysia, Singapore and South Africa launch CBDT scheme

Posted by
Subscribe for News Feed
Central Bank Digital Currency (CBDT) Scheme

CBDC Scheme: Australia, Malaysia, Singapore, and South Africa, on 2nd September 2021, unveiled a joint Central Bank Digital Currency (CBDC) scheme.

Note: CBDCs are digital forms of existing currencies.

Key Details:

  • CBDC scheme is a cross-border payments trial that uses different central bank digital currencies (CBDC) to assess if this allows transactions to be settled more cheaply and easily.
  • The use CBDCs are being explored by many governments and central banks across the world.
  • The Reserve Bank of Australia, Bank Negara Malaysia, the Monetary Authority of Singapore, the South African Reserve Bank, and the Bank of International Settlement’s Innovation Hub, are leading the scheme.
  • China is trialing retail-focused CBDCs designed to replicate cash in circulation.
  • Many governments and central banks of other countries are considering using wholesale CBDCs in order to improve the internal workings of financial systems.
  • Most of the projects are still in the early stages and are domestically focused. But, the developing global rules and frameworks on how CBDCs can be used internationally are complicated technically.
  • A separate BIS-led project to explore CBDCs for cross-border payments is also in the process which involves central banks from China, Hong Kong, the UAE.

Aim of the latest CBDC project:

  • The latest CBDC project was launched with the aim of developing prototype shared platforms for cross-border transactions by using multiple CBDCs.

Significance:

  • These new platforms would enable the financial institutions to transact directly with each other across CBDCs.
  • It would improve cross-border payments by eliminating the requirement for intermediaries and reduce the time and cost of transactions.

Note: More countries around the world are advancing their efforts to develop their own central-bank digital currencies, which would offer a centralized, official alternative to decentralized cryptocurrencies such as bitcoin or ether, or privately issued stablecoins such as tether or US coin.

  • The initiative will also explore different technical, governance, and operating designs.
  • It will also publish its results in early 2022.

What is Central bank digital currency (CBDC)?

  • CBDC is the virtual format of a fiat currency in a particular nation or region.
  • It is an electronic record or digital token of official currency.
  • This currency is issued and regulated by its monetary authority.

Subscribe for News Feed