Central Bank Digital Currencies (CBDCs) may not be the solution for today’s financial woes, but they might be just the answer to unforeseen challenges down the line, believes Dilip Rao, a former Ripple executive who’s leading Australia’s exploration into CBDCs. Rao suggests that CBDCs could pave the way for resolutions to problems we are yet to encounter today.
As Chief of the Digital Finance Cooperative Research Centre (DFCRC), Rao is spearheading the collaborative effort with the Reserve Bank to study the potential applications of a CBDC. However, he asserts that the value of such a digital currency lies in its usability for the public.
Illustrating a potential future scenario, Rao hints at the possibility of large institutions preferring a CBDC for trading tokenized assets on marketplaces to ensure risk mitigation.
Currently, Australia’s CBDC initiative is studying 14 possible use cases. The pending report on these tests will shed light on which applications are worth further exploration. Rao emphasizes that a CBDC should not be considered the be-all and end-all solution, acknowledging that its successful adoption would rely heavily on perceived value by users.
However, the implementation of a CBDC in Australia could hit a legislative roadblock, requiring popular support for modifications to existing laws. Rao posits that gaining political support would involve thorough public consultation to address societal concerns. Rao’s strategy centers around addressing problems the public wants to resolve.
An interesting caveat here, however, lies in the political realm. No politician will endorse something that could potentially cost them votes, adds Rao. This underlines the importance of a well-considered approach integrating technological and legislative solutions to ensure public comfort and confidence in the introduction of a CBDC.
Rao’s viewpoint segues into a rather intriguing question: are we, in chasing today’s solutions, overlooking potential gems for future problems? Perhaps, working on a digital currency today may not solve immediate issues, but could lend us the tools to counteract emerging financial challenges of the future. At the same time, it’s worth remembering that any transition to a new kind of money, digital or otherwise, will require carefully balanced technological and legislative measures to win public trust and acceptance. This brings to light the inherent intricacies of implementing new financial technologies such as CBDCs into mainstream economic systems.
Source: Cointelegraph
