With many possibilities, blockchain technology and cryptocurrencies have moved far beyond just private industries and are disrupting the public sector as well. Central banks all over the world are now analysing the idea behind the issuance of digital currencies, and in 2020 there are multiple central banks working on Central Bank Digital Currencies (CBDCs).
Dutch central bank joins the race
The latest to announce its involvement in the CBDC race is the De Nederlandsche Bank DNB), the Dutch Central Bank. In a report published on April 21, the bank urged that it wants to be the proving ground for CBDCs in Europe and is “ready to play a leading role” in research and development on this matter.
The report published discussed the benefits of smart contracts in the development of a CBDC and how it is going to make cross-border payments faster and a lot cheaper for all the participating states. The Netherlands has been suggested as a suitable testing ground according to the report.
The Netherlands suitable for testing
The switch towards a completely digital monetary system is because of the declining use of paper currency and coins in the Netherlands. This is also partly why the Netherlands is a suitable testing ground.
According to reports, cash was used for 32% of purchases last year, down from 37% in 2018. On the other hand, contactless debit card payments rose to 43%, beating cash’s share for the first time. Total debit card payments reached 67% of purchases.
The Coronavirus outbreak has kindled a distaste for physical money, and the DNB report notes that businesses that are open at the moment are avoiding it:
“Many stores now ask clients specifically not to pay in cash, which effectively means that only private money is accepted.”
Interestingly, the report also noted that Facebook’s highly criticized stablecoin Libra, is marked as a threat to the monetary stability of the nation and it was “the reason why the DNB and other central banks are now considering issuing their own digital currency.”
Europe pushing towards CBDC
Member of the European Union has been quite active in the CBDC race. Earlier this month, Bank of France announced that it is looking for applicants to test the use of a digital euro in efforts to explore the various possibilities involved with CBDCs.
Furthermore, Christine Lagarde, The president of the European Central Bank (ECB), showed her support towards the ECB’s involvement with CBDC research in January. In an interview with French business magazine Challenges, Lagarde said:
“ECB will continue to assess the costs and benefits of issuing a central bank digital currency that would ensure that the general public remains able to use central bank money even if the use of physical cash eventually declines.”