The rapid development of central bank digital currencies could help to boost financial inclusion and stability, but they pose a threat to banks and could weaken their ability to lend, according to a report by Fitch Ratings.
CBDCs would help to speed up cashless payments and could "bring underbanked communities into the financial system" in many emerging markets.
In the Bahamas, for instance, where the "Sand Dollar" CBDC was introduced in October, low-value CBDC transactions can be carried out using just a phone number or an email address for identification.
“The deployment of CBDCs will create opportunities to strengthen financial system inclusion, innovation, resilience and efficiency, but may also give rise to new risks,” said Monsur Hussain, an analyst at Fitch Ratings and co-author of the report.
For instance, CBDCs "will inevitably involve households and businesses converting some of their commercial bank deposits into CBDCs", the report said.
"All other things being equal, this would require banks to shrink their balance sheets", affecting their capacity to lend, it said.
China was one of the first major economies to develop plans for a CBDC back in 2014 and has already begun limited trials via mobile apps. Other major economies are quickly following suit.
Last month, the Bank of Japan began a year-long series of experiments for a digital yen and the UK Treasury and Bank of England set up a joint task force to develop a CBDC, nicknamed the "Britcoin".
And on Thursday, Federal Reserve chairman Jerome Powell announced that the US central bank will publish a discussion paper over the summer "outlining our current thinking on digital payments, with a particular focus on the benefits and risks associated with CBDC in the US context".
The Fed will listen to a range of voices before deciding "whether and how to move forward with a US CBDC, taking account of the broader risks and opportunities it could offer", said Mr Powell.
Whether or not the Fed proceeds with a CBDC, "we expect to play a leading role in developing international standards for CBDCs, engaging actively with central banks in other jurisdictions as well as regulators and supervisors here in the US", he said.
Governance and oversight of CBDCs is an issue that many of the pilot projects are wrestling with – particularly how to make digital payments easier while replicating the "anonymity of cash", Fitch Ratings said.
Complete anonymity for transactions is probably unlikely, given that this is one of the challenges central banks face with the growth of cryptocurrencies as an asset class and their widespread use in illicit activity.
Cryptocurrencies "have not served as a convenient way to make payments, given, among other factors, their swings in value", said Mr Powell.
He also indicated that as "stablecoins" – digital assets that are linked to the US dollar or other currencies – grow in use, so will the Fed's oversight of them.
Although users "may be reluctant to accept a digital cash substitute if it does not grant a sufficient degree of privacy", trade-offs already exist between anonymity and regulators' ability to track illegal activity, even through the use of cash, the Fitch report said.
"There may be variations in anonymity between markets, depending on local attitudes among the public and regulators. Party identification data may, for example, be limited between transaction participants. However, we believe in general that central banks and regulators are likely to have access to such information with CBDC transactions," said Fitch Ratings.
CBDCs could also give governments and central banks much greater control over how money is used, with programmable smart contracts allowing them to embed restrictions in how a currency is spent, for example.
A digital currency distributed as part of stimulus packages could also have expiry dates to encourage it to be spent within a specific period of time, the credit rating agency said.
Another potential benefit is the use of CBDCs in cross-border payments. The central banks of the UAE and Saudi Arabia concluded a year-long study known as Project Aber last year, which "confirmed that Distributed Ledger [blockchain] Technology can provide central banks with the ability to reimagine both domestic and cross-border payment systems in new ways".
In February, the UAE Central Bank said it was participating in a central bank digital currency project with the Hong Kong Monetary Authority, the Bank of Thailand and the People's Bank of China to investigate the use of CBDCs in cross-border payments.
"With issuance of CBDCs, money transfers [within and between countries] could be improved in terms of efficacy and cost," Deutsche Bank's chief investment officer Christian Nolting said in a note to clients last month.
However, any cross-border payment system that reduces the dominance of the US dollar in the global financial system could face challenges, Fitch Ratings said.
"Previous efforts to develop payment systems to bypass those controlled by the US have struggled, such as one launched by the EU to allow trade with Iran after the US tightened sanctions in 2018. This partly reflects the strong network effects enjoyed by incumbent systems, as well as the complexity of negotiating interoperability between jurisdictions."
Mohammed bin Zayed Majlis
Arrogate's winning run
1. Maiden Special Weight, Santa Anita Park, June 5, 2016
2. Allowance Optional Claiming, Santa Anita Park, June 24, 2016
3. Allowance Optional Claiming, Del Mar, August 4, 2016
4. Travers Stakes, Saratoga, August 27, 2016
5. Breeders' Cup Classic, Santa Anita Park, November 5, 2016
6. Pegasus World Cup, Gulfstream Park, January 28, 2017
7. Dubai World Cup, Meydan Racecourse, March 25, 2017
UAE currency: the story behind the money in your pockets
Brief scores:
Pakistan (1st innings) 181: Babar 71; Olivier 6-37
South Africa (1st innings) 223: Bavuma 53; Amir 4-62
Pakistan (2nd innings) 190: Masood 65, Imam 57; Olivier 5-59
UAE currency: the story behind the money in your pockets
Stage 5 results
1 Tadej Pogacar (SLO) UAE Team Emirates 3:48:53
2 Alexey Lutsenko (KAZ) Astana Pro Team -
3 Adam Yates (GBR) Mitchelton-Scott -
4 David Gaudu (FRA) Groupama-FDJ 0:00:04
5 Ilnur Zakarin (RUS) CCC Team 0:00:07
General Classification:
1 Adam Yates (GBR) Mitchelton-Scott 20:35:04
2 Tadej Pogacar (SlO) UAE Team Emirates 0:01:01
3 Alexey Lutsenko (KAZ) Astana Pro Team 0:01:33
4 David Gaudu (FRA) Groupama-FDJ 0:01:48
5 Rafał Majka (POL) Bora-Hansgrohe 0:02:11
Mohammed bin Zayed Majlis
Name: Peter Dicce
Title: Assistant dean of students and director of athletics
Favourite sport: soccer
Favourite team: Bayern Munich
Favourite player: Franz Beckenbauer
Favourite activity in Abu Dhabi: scuba diving in the Northern Emirates
KILLING OF QASSEM SULEIMANI
UAE currency: the story behind the money in your pockets
Killing of Qassem Suleimani
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Farage on Muslim Brotherhood
Nigel Farage told Reform's annual conference that the party will proscribe the Muslim Brotherhood if he becomes Prime Minister.
"We will stop dangerous organisations with links to terrorism operating in our country," he said. "Quite why we've been so gutless about this – both Labour and Conservative – I don't know.
“All across the Middle East, countries have banned and proscribed the Muslim Brotherhood as a dangerous organisation. We will do the very same.”
It is 10 years since a ground-breaking report into the Muslim Brotherhood by Sir John Jenkins.
Among the former diplomat's findings was an assessment that “the use of extreme violence in the pursuit of the perfect Islamic society” has “never been institutionally disowned” by the movement.
The prime minister at the time, David Cameron, who commissioned the report, said membership or association with the Muslim Brotherhood was a "possible indicator of extremism" but it would not be banned.
Killing of Qassem Suleimani
'The Sky is Everywhere'
Director:Josephine Decker
Stars:Grace Kaufman, Pico Alexander, Jacques Colimon
Rating:2/5
The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
Key figures in the life of the fort
Sheikh Dhiyab bin Isa (ruled 1761-1793) Built Qasr Al Hosn as a watchtower to guard over the only freshwater well on Abu Dhabi island.
Sheikh Shakhbut bin Dhiyab (ruled 1793-1816) Expanded the tower into a small fort and transferred his ruling place of residence from Liwa Oasis to the fort on the island.
Sheikh Tahnoon bin Shakhbut (ruled 1818-1833) Expanded Qasr Al Hosn further as Abu Dhabi grew from a small village of palm huts to a town of more than 5,000 inhabitants.
Sheikh Khalifa bin Shakhbut (ruled 1833-1845) Repaired and fortified the fort.
Sheikh Saeed bin Tahnoon (ruled 1845-1855) Turned Qasr Al Hosn into a strong two-storied structure.
Sheikh Zayed bin Khalifa (ruled 1855-1909) Expanded Qasr Al Hosn further to reflect the emirate's increasing prominence.
Sheikh Shakhbut bin Sultan (ruled 1928-1966) Renovated and enlarged Qasr Al Hosn, adding a decorative arch and two new villas.
Sheikh Zayed bin Sultan (ruled 1966-2004) Moved the royal residence to Al Manhal palace and kept his diwan at Qasr Al Hosn.
Sources: Jayanti Maitra, www.adach.ae
More from Neighbourhood Watch:
Previous men's records
- 2:01:39: Eliud Kipchoge (KEN) on 16/9/19 in Berlin
- 2:02:57: Dennis Kimetto (KEN) on 28/09/2014 in Berlin
- 2:03:23: Wilson Kipsang (KEN) on 29/09/2013 in Berlin
- 2:03:38: Patrick Makau (KEN) on 25/09/2011 in Berlin
- 2:03:59: Haile Gebreselassie (ETH) on 28/09/2008 in Berlin
- 2:04:26: Haile Gebreselassie (ETH) on 30/09/2007 in Berlin
- 2:04:55: Paul Tergat (KEN) on 28/09/2003 in Berlin
- 2:05:38: Khalid Khannouchi (USA) 14/04/2002 in London
- 2:05:42: Khalid Khannouchi (USA) 24/10/1999 in Chicago
- 2:06:05: Ronaldo da Costa (BRA) 20/09/1998 in Berlin
Read more about the coronavirus
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%3Cp%3E%3Cstrong%3ECreator%3A%3C%2Fstrong%3E%20Ramez%20Galal%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStarring%3A%3C%2Fstrong%3E%20Ramez%20Galal%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStreaming%20on%3A%20%3C%2Fstrong%3EMBC%20Shahid%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%20%3C%2Fstrong%3E2.5%2F5%3C%2Fp%3E%0A
Disclaimer
Director: Alfonso Cuaron
Stars: Cate Blanchett, Kevin Kline, Lesley Manville
Rating: 4/5
What can victims do?
Always use only regulated platforms
Stop all transactions and communication on suspicion
Save all evidence (screenshots, chat logs, transaction IDs)
Report to local authorities
Warn others to prevent further harm
Courtesy: Crystal Intelligence
Zayed Sustainability Prize
The five pillars of Islam
Mohammed bin Zayed Majlis
The years Ramadan fell in May
RESULT
Leeds United 1 Manchester City 1
Leeds: Rodrigo (59')
Man City: Sterling (17')
Man of the Match: Rodrigo Moreno (Leeds)
KILLING OF QASSEM SULEIMANI
More on animal trafficking
Meydan racecard:
6.30pm: Al Maktoum Challenge Round 2 (PA) Group 1 | US$75,000 (Dirt) | 2,200 metres
7.05pm: UAE 1000 Guineas (TB) Listed | $250,000 (D) | 1,600m
7.40pm: Meydan Classic Trial (TB) Conditions | $100,000 (Turf) | 1,400m
8.15pm: Al Shindagha Sprint (TB) Group 3 | $200,000 (D) | 1,200m
8.50pm: Handicap (TB) | $175,000 (D) | 1,600m
9.25pm: Handicap (TB) | $175,000 (T) | 2,000m
10pm: Handicap (TB) | $135,000 (T) | 1,600m
The specs
Engine 60kwh FWD
Battery Rimac 120kwh Lithium Nickel Manganese Cobalt Oxide (LiNiMnCoO2) chemistry
Power 204hp Torque 360Nm
Price, base / as tested Dh174,500
The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
Read part four: an affection for classic cars lives on
Read part three: the age of the electric vehicle begins
Read part one: how cars came to the UAE
More from Neighbourhood Watch:
UAE currency: the story behind the money in your pockets
About RuPay
A homegrown card payment scheme launched by the National Payments Corporation of India and backed by the Reserve Bank of India, the country’s central bank
RuPay process payments between banks and merchants for purchases made with credit or debit cards
It has grown rapidly in India and competes with global payment network firms like MasterCard and Visa.
In India, it can be used at ATMs, for online payments and variations of the card can be used to pay for bus, metro charges, road toll payments
The name blends two words rupee and payment
Some advantages of the network include lower processing fees and transaction costs
More coverage from the Future Forum
BULKWHIZ PROFILE
Date started: February 2017
Founders: Amira Rashad (CEO), Yusuf Saber (CTO), Mahmoud Sayedahmed (adviser), Reda Bouraoui (adviser)
Based: Dubai, UAE
Sector: E-commerce
Size: 50 employees
Funding: approximately $6m
Investors: Beco Capital, Enabling Future and Wain in the UAE; China's MSA Capital; 500 Startups; Faith Capital and Savour Ventures in Kuwait
