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One day, Nigeria’s paper money or banknotes would be disrupted the way it is happening with banking transaction presently, and digital currency would be in use.
Paper money would be a history just like bata and commodity. It will happen in this country, it is only a matter of time. As it were, coins are gradually going into extinct.
Digital currency is a type of currency available in digital form. It can be used to purchase goods and services but can also be restricted to certain online communities.
Central Banks have always safeguarded their country’s currencies and some like the Nigeria’s Central Bank, have issued warning against cryptocurrencies.
However, some regulators have started experimenting with the idea of cryptocurrencies and the underlying blockchain technology.
The South African (SA) Reserve Bank is warming up to the idea of digital currency and has asked the industry to help it come up with the best ideas.
Some of the world’s biggest banks are said to be investing around $50 million to build a blockchain-based digital cash settlement system.
In 2015, Swiss banking giant UBS was said to be working on a cryptocurrency that would be “linked to real-world currencies and connected to central bank accounts” along with blockchain startup Clearmatics.
Reuters report noted that Bank of New York Mellon Corp, State Street Corp, Credit Suisse Group, Barclays, HSBC Holdings and Deutsche Bank have also been working on the “utility settlement coin” (USC) project.
The International Monetary Fund (IMF) last week said that Central Bank Digital Currencies (CBDC) is one of the significant issues deserving consideration by policy makers.
The Fund said less than one-quarter of central banks around the world are actively exploring the possibility of issuing CBDC and that so far, only four pilot projects have been reported.
There are surely some positive aspects of adopting CBDC, said IMF. The Fund said it could reduce the costs associated with the use of cash, and it may improve financial inclusion in cases where there have been unsuccessful private-sector initiatives and unsuccessful policy efforts.
It could also help central banks strengthen the security of, and trust in, the payment system — and it could protect consumers where regulation does not adequately limit private monopolies. Moreover, issuing CBDC could also facilitate the “contestability” of the payments market, and could reduce the risk of having a few large providers dominating the system.
But how ready are Nigerian banks in adoption of digital currency, Uche Olowu, president/chairman of council, Chartered Institute Bankers of Nigeria (CIBN) said, “banks are ready for this of course. It is part of progress development that is happening. We are developing our intellects more to appreciating our environment and making sure that life is more comfortable. So it is not something we have to be afraid of in terms of disruption or technology that is coming, banks are ready whichever way”.
Olowu who spoke with some journalists immediately after the annual general meeting of the CIBN said there is disruption in banking industry and that there is going to be another disruption on paper money.
However, the Fund said central banks must also carefully evaluate the potential downsides to issuing CBDC. These could include: Concerns about integrity risks, if the CBDC is issued as an anonymous instrument that could be used for illicit activities. Almost all central banks that are researching the issuance of CBDC seem to favor a hybrid approach that allows central banks — and only central banks — to trace transactions; The potential impact on financial intermediation. Depending on the design of the CBDC, it is conceivable that bank deposits could migrate to CBDC, thus fundamentally changing the nature of financial intermediation; and The impact on monetary policy conduct and transmission channels, among others.