🌎 CBDC Adoption Gains Momentum, Faces Interoperability Challenge

Pallavi Thakur, Director of Strategy and Innovation at Swift, and Ryan Rugg from Citi shared insights at Money20/20 regarding their recent collaborative CBDC experiment. Both Thakur and Rugg highlighted the rapid progress in the global adoption of central bank digital currencies (CBDCs) and emphasized the urgent need for interoperability among different systems, a challenge that requires immediate attention.

“It’s like the early days of the Internet. You have all these various intranets developing,” Rugg said. “What’s going to be the connectivity between all of it?”

Adoption of CBDCs

The adoption of CBDCs is gaining momentum globally as central banks explore these digital currencies to improve payment systems, ensure financial stability, and promote economic growth. CBDCs are digital versions of traditional fiat currencies controlled by central banks. Unlike cryptocurrencies, CBDCs have a stable value tied to their nation’s currency, supported by monetary policies and regulations.

Governments worldwide are considering CBDCs, with 134 countries exploring the idea and 36 countries piloting initiatives. However, digital currency presents challenges such as susceptibility to fraud, glitches, and transaction errors.

“When you talk about 36 countries, imagine 36 bilateral connections, it’s not going to scale, right? So these numbers are great but also present challenges,” Thakur said. “If I, as a consumer, want to send payment from my digital account to somebody in India, which needs to be in a digital rupee, it should be absolutely seamless,” Thakur said.

Market Utility

Initially, CBDCs were largely siloed as niche experiments or limited to early-stage pilot programs. Today, they have become far more global and common, with widespread adoption among banks and retailers. This shift in the financial landscape towards digital currencies underscores the need for utility and unity among all financial institutions working with CBDCs, ensuring seamless transactions across different digital currencies.