Q&A: FNA's Carlos León on how digital money can be more efficient and safe

As multiple nations push ahead on the idea of central bank digital currencies (CBDCs), UK-based FNA has been helping them do so. Carlos León, FNA's director of Financial Market Infrastructures and Digital Currencies Solutions, talked about what nations are doing to launch digital currencies and what advantages they might offer.

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"There are several conveniences of cash. Transactional anonymity, namely the ability to keep your identity to yourself when making a payment, is one of the most important conveniences of cash. Also, free, universal access to cash for consumers and its universal acceptance — as legal tender — make cash an important public good and public infrastructure. Its ease of use, non-dependence on technology (eg., power and internet), and its ability to work offline make cash a robust payment instrument that grants redundancy to the payment system.

"The adoption of a CBDC will depend on how it compares to the conveniences of cash in each jurisdiction, and on the new features that it can offer to the public. For instance, in those jurisdictions where the public cares for anonymity, the potential role of the central bank as an overseer of peoples’ transactions could jeopardize the success of the CBDC; that’s why different layers of anonymity, say, depending on the size of the transaction, have been suggested as a way to comply with anti-money laundering and know-your-client regulations without compromising the desire for anonymity in day-to-day transactions. Regarding free and universal access, jurisdictions in which people’s access to the technology and resources necessary to use a CBDC is poor, success depends on the ability of the central bank and other stakeholders to create the necessary conditions; otherwise, CBDC adoption could fail in undeveloped countries that aimed at higher financial inclusion and efficiency of the payments ecosystem.

"Thus, it is rather clear that the successful rollout and adoption of a CBDC depends on the extent its design choices match the needs of the public and on the main idiosyncratic features of the corresponding jurisdiction. How the central bank designs and implements the CBDC, along with how regulation protects the public’s rights (e.g., anonymity, access, safety, efficiency), will determine the extent to which this new form of central bank money will be adopted by the population."

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