Dutch bank ING’s Chief Economist Mark Cliffe has said that central banks across the globe will develop digital currencies in the next 2-3 years. Cliffe presented his thoughts in a video report published on the ING website. The economist reckons that Facebook Libra has put pressure on global monetary authorities and central banks will have to respond with their own digital currencies to counter their threat.
ING states in their report, “Rapid advances in distributed ledger technology have spurred debate about the possibilities, advantages and drawbacks of central bank digital currencies. The principal limits and trade-offs seem to stem from CBDC’s economic, monetary and financial contexts, and depend on underlying policy and political preferences concerning privacy, data administration, market power, cybersecurity, and the division of labour between the public and private sectors.”
Cliffe added that a digital currency would allow banks to replace physical cash and allow them to move even further into negative territory with interest rates. He stated that it would open up a whole range of policy options and provide new ways to support economic activity in a future downturn.
While Libra has faced a lot of pressure from regulators across the globe, monetary authorities across the globe are recognising the threat to their own systems and preparing an appropriate counter-response. Interestingly, the official committee report which proposed a blanket ban on cryptocurrencies in India, has also recommended the development of a Central Bank Digital Currency (CBDC).