CBDC: the first test of international transactions is not satisfactory – BeinCrypto International

The CBDC and their system proved disappointing in the first global usage test organized by the Bank for International Settlements.

Still a lot of adjustments to be made on the CBDCs

CBDCs had recently been heralded as making their imminent burst into the world of finance. While the digital euro is on the way and that a big crypto company participate to the development of a digital dollar, the opening of competition between these new institutionalized coins and Bitcoin seems to be an increasingly pressing threat. Nevertheless, the last test concerning them came to change the situation.

Indeed, the Bank for International Settlements has launched the mBridge project. This, considered a pilot, consisted of test phases used to confirm whether or not the possibility of using CBDCs on a daily basis as well as to determine their true effectiveness. The bulk of the operations took place between August 15 and September 23. During these, the participating establishments were instructed to transfer their own CBDC but also to do business with those from abroad.

The results, reported in a document published by the BIS, are far from entirely satisfactory. On the positive side, the system has proven to be effective as it has enabled 20 commercial banks around the world to perform around 100 transactions with a total value of $22 million.

Source: Twitter account of the Bank for International Settlements

However, on a more practical side, the use and transfer of CBDCs proved to be very burdensome for the participants. Indeed, the transactions were limited by certain requirements of the central banks. While they want to balance token balances daily, financial institutions find themselves forced to offload CBDCs from abroad every day.
In a similar vein, exchange rates proved to be problematic since they turned out to be different between the time the transaction was decided upon and the time the money was received by the recipient. A phenomenon that has forced establishments to dip into their balance in order to transfer the right account.

Despite these many issues that CBDC advocates may not have thought of before, the BRI says mBridge is far from complete and these transaction concerns will be addressed in the next steps. Central banks are therefore far from abandoning their project and we therefore risk seeing the digital euro actually appear in the years to come.

The official tokens are far from being adopted

Despite the stubbornness of central banks and various authorities to set up CBDCs, another problem still arises: the use of coins by the population. In countries where crypto is sufficiently established, taxpayers are reluctant to barter Bitcoin against the token offered by traditional finance.

This is for example the case in Nigeria where the government has released its own CBDC. Entitled eNaira and put into circulation for about 1 year, it is far from finding the expected success with only 0.5% adoption. According Bloomberg, the phenomenon would be due to the population’s preference for crypto but also to the lack of confidence in the national currency which has been devalued several times. New obstacles could therefore come to oppose the central banks and constitute new challenges.

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CBDC: the first test of international transactions is not satisfactory – BeinCrypto International


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