Digital banking Tip the balance
For decades, central banks and their private cousins have shared the job of making money. While government institutions issue physical currency – the pounds, dollars and yuan we keep in our pockets – commercial banks have traditionally dominated digital currency. But with the rise of central bank digital currencies (CBDCs), this delicate balance could soon disappear. Naturally, this would fundamentally reshape global banking, with commercial banks a potential loser. Andrea Valentino talks to Simon Youel at Positive Money and Dr Rashad Cassim from South Africa’s central bank to learn why countries are experimenting with CBDCs, the problems that could cause commercial lenders, and why CBDCs might ultimately force traditional banks to sharpen their own services.
he Bank of England has always changed with the times. Founded as a private institution in the autumn days of the seventeenth century, it was finally nationalised in 1946. Issued when Robert Walpole was prime minister, its first banknotes were rugged affairs, filled with signatures and scribbles. By the time Ted Heath was in Downing Street, some 245 years later, notes boasted elegant pictures and colourful printed titles. By the 2016 Brexit referendum, the bank’s £5 notes were printed on durable, flexible polymer. The personnel at the bank have adapted too. Compared with the portraits of early governors, all powdered wigs and pomp, Mark Carney felt positively dull. That he wasn’t even British was just another first.
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To put it another way, the Old Lady of Threadneedle Street can still learn new tricks – and its latest venture could be its most transformational yet. In 2020, the bank announced it was exploring the potential of central bank digital currencies (CBDCs). Dispensing with physical currency for the first time in its 327-year history, the bank would instead issue money that existed only in ones and zeros, filling digital wallets with digital cash. And though the Bank of England is still investigating CBDCs, many other central banks are rushing ahead with their own schemes. Launched in October 2020, for example, the Sand Dollar is a digital version of the Bahamian Dollar. On the opposite side of the Atlantic, the eNaira is Nigeria’s new virtual
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