As the world continues to embrace digital currencies, it’s no surprise that discussions concerning the widespread adoption of central bank digital currencies (CBDCs) are gaining momentum. Among the nations considering CBDCs is Hungary, a European Union (EU) member in no hurry to discard its national currency, the forint. While many European countries – including those responsible for the pound, euro, and Swedish krona – are exploring the possibility of issuing their currencies digitally, the Hungarian Central Bank is taking a more cautious approach.
At a recent event hosted by the think tank Official Monetary and Financial Institutions Forum, Anikó Szombati, Chief Digital Officer of the Hungarian Central Bank, stated that they see no immediate need for a large-scale retail CBDC to be introduced by regular citizens and merchants. This stance might seem contrary to the ongoing market trend; however, a careful examination of Hungary’s demographics sheds light on their approach. Interestingly, around 13% of Hungarian adults still don’t have bank accounts.
While there might not be an urgent need for a CBDC in Hungary, the Central Bank remains open to exploring the possibilities of issuing a digital currency. According to Szombati, the bank is currently undertaking a series of pilots to remain at the forefront of CBDC research. By taking a measured and methodical approach, it is clear that the Hungarian Central Bank is in no rush to force a change upon its constituents overnight.
The decision to launch a CBDC should rely on addressing either a significant market failure or a potent policy objective, added Szombati. In Hungary’s case, a CBDC could serve as an incentive to incorporate more people into the financial system, ultimately reducing the unbanked population. Close to 9 out of 10 central banks worldwide are currently exploring CBDCs, as revealed by studies conducted by the Bank for International Settlements.
One significant aspect to consider when introducing a CBDC is the implications it holds for privacy and financial security. As more nations look towards adopting digital currencies, the urgency for strong privacy policies, terms of use, and cookie management cannot be overstated. As we hurtle towards the future of money, the race to adopt digital currencies, along with the challenges they pose, will continue to unveil themselves. It remains to be seen how Hungary, alongside other sovereign nations, will navigate these complex waters while maintaining financial stability and embracing the digital age.
Source: Coindesk
