3 min read – With gen AI, finance leaders can automate repetitive tasks, improve decision-making and drive efficiencies that were previously unimaginable.
Digital mediums of exchange are extremely prevalent in the world and have a broad range that goes from virtual currencies like Fortnite’s V-Bucks to cryptocurrencies such as Bitcoin. These currencies can often be used in the real world to exchange for physical goods and services, just like paper banknotes, but are often restricted to specific communities as is often the case with electronic money. The record of the funds available to a consumer is stored on an electronic device for use over a computer network and is often limited to specific networks like Visa, Mastercard and others.
Because of the benefits afforded by a central bank digital currency, policymakers at central banks estimate that at least one consumer-ready CBDC will launch within the next five years, according to a new study from IBM and OMFIF, an independent think tank. A central bank digital currency (CBDC) is a digital extension of a central bank’s medium of exchange able to permanently settle transactions between parties. The central bank is able to remove credit risk and ensure stability by guaranteeing the value of the CBDC, exactly like paper money. And any person tied to any central bank on the network can instantaneously transfer value between any other person tied to any other central bank on the network. The defining value of blockchain for business is the ability to collaborate between networks and that is one of the defining blockchain use cases.
But while there will likely always be a role for private banking — central banks surveyed by OMFIF almost unanimously said CBDCs would be implemented through public-private partnerships — once the first CBDC is launched, more will likely follow. A record that they could debit and credit between parties in seconds without being limited to a network provider and any party on the blockchain network, regardless of geography, could instantly transfer funds. But the benefits of a formal financial institution aren’t available for 2.5 billion people in the world who are unbanked, not only because of poverty, but also due to costs, travel distance and paper work involved. 3 min read – Solutions must offer insights that enable businesses to anticipate market shifts, mitigate risks and drive growth. 3 min read – Businesses with truly data-driven organizational mindsets must integrate data intelligence solutions that go beyond conventional analytics.
These people, who often live in developing economies where the transfer cost of remittances is often the highest, stand to benefit the most from financial institutions issuing central bank digital currencies secured by blockchain technology. We develop a general equilibrium model that highlights the trade-offs between physical and digital forms of retail central bank money. The key differences between cash and central bank digital currency (CBDC) include transaction efficiency, possibilities for tax evasion, and, potentially, nominal rates of return. We establish conditions under which cash and CBDC can co-exist and show how government policies can influence relative holdings of cash, CBDC, and other assets. We illustrate how a CBDC can facilitate negative nominal interest rates and helicopter drops, and also how a CBDC can be structured to prevent capital flight from other assets.
