How Are Central Banks Exploring Digital Currencies with Fintech Firms?

Central Banks Explore Digital Currencies with Fintech

The COVID-19 pandemic has highlighted the need for contactless payment solutions. Digital currencies, like Bitcoin, have gained traction as a possible solution. Central banks worldwide are now exploring the development of central bank digital currencies (CBDCs) to meet this demand.

Partnership for Digital Currency Sandbox

R3, a blockchain solutions provider, and the ASEAN Financial Innovation Network (AFIN) have partnered to create a CBDC sandbox. This tool will allow central banks and fintech companies to develop and test their CBDC solutions.

The sandbox will be available on the API Exchange (APIX) platform from August 2021. It will provide access to APIs that enable the creation of CBDC applications for payment rails and multi-currency solutions.

Benefits of CBDCs for Central Banks

Pieter Franken, an independent advisor at AFIN, believes the sandbox will benefit central banks. He notes that the adoption of cryptocurrencies like Bitcoin is growing, and CBDCs can provide a more regulated alternative.

“With R3’s APIs on APIX, we will see financial institutions and fintech firms designing new CBDC solutions collaboratively and deploying them as future-ready enterprises.”

China’s Progress in Digital Yuan Trials

China is at the forefront of CBDC development. The People’s Bank of China (PBoC) has been conducting trials of its digital yuan (DCEP) since 2020. In June 2021, the PBoC distributed $6.2 million to participants in its latest round of testing.

Conclusion

Central banks around the world are exploring the potential of CBDCs. Partnerships between traditional financial institutions and fintech companies are crucial in this process. The APIX platform’s CBDC sandbox will play a significant role in fostering collaboration and innovation in the development and adoption of digital currencies.