{"id":214369,"date":"2022-11-14T20:59:57","date_gmt":"2022-11-14T15:29:57","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=214369"},"modified":"2022-11-14T20:59:57","modified_gmt":"2022-11-14T15:29:57","slug":"spare-a-thought-for-the-trilemma-of-central-bank-digital-currencies","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/spare-a-thought-for-the-trilemma-of-central-bank-digital-currencies\/","title":{"rendered":"Spare a thought for the trilemma of central bank digital currencies"},"content":{"rendered":"\n<p><strong>Source<\/strong>: The post is based on an article\u00a0<strong>\u201cSpare a thought for the trilemma of central bank digital currencies\u201d <\/strong>published in <strong>Live Mint<\/strong>\u00a0on\u00a0<strong>14<sup>th<\/sup> November 2022<\/strong>.<\/p>\n<p><strong>Syllabus: GS 3- Growth and Development<\/strong><\/p>\n<p><strong>Relevance: <\/strong><strong>challenges with CBDC<\/strong><\/p>\n<p><strong>News:<\/strong> Central banks around the world have started to issue their own digital currencies (CBDC) but it has challenges too.<\/p>\n<h5><strong>Why are central banks issuing CBDC?<\/strong><\/h5>\n<p>One of the reasons behind issuing CBDC is that it will be <strong>accessible<\/strong> to masses that will bring <strong>financial inclusion<\/strong> and <strong>ease of payments<\/strong>. However, there are other ways of financial inclusion which India has already tried.<\/p>\n<h5><strong>How has India tried to achieve financial inclusion?<\/strong><\/h5>\n<p><strong>The Prime Minister\u2019s People\u2019s Wealth Scheme<\/strong> has addressed the issue of offering zero-balance, low-cost accounts to underbanked rural residents. This led around 400 million people to open the account.<\/p>\n<p>Further, the <strong>United Payments Interface (UPI)<\/strong> is also a low cost electronic-payments infrastructure that has also helped in financial inclusion.<\/p>\n<h5><strong>What are the challenges with CBDC?<\/strong><\/h5>\n<p>It is argued that CBDC will help in facilitating the <strong>cross-border payments<\/strong> and might be a <strong>digital alternative<\/strong> to the dominance of the US dollar.<\/p>\n<p>Central banks with help from the Bank for International Settlements have also experimented with a platform <strong>\u2018mBridges\u2019<\/strong> to globally exchange CBDC.<\/p>\n<p>However, there are political concerns with the use of CBDC globally and it would also be difficult to adopt such a common platform worldwide.<\/p>\n<p><strong>For example,<\/strong> it would be difficult for China and the US to come to an agreement on a single platform of exchanging CBDC.<\/p>\n<p>Therefore, central banks face a trilemma when issuing CBDC as they can have only two of three things &#8211; <strong>a digital currency, confidentiality of transactions and financial stability.<\/strong><\/p>\n<p>Further, if CBDCs are used for bank transfers then commercial banks will be disintermediated from the system which will raise financial risk and imbalances for the central banks.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Source: The post is based on an article\u00a0\u201cSpare a thought for the trilemma of central bank digital currencies\u201d published in Live Mint\u00a0on\u00a014th November 2022. Syllabus: GS 3- Growth and Development Relevance: challenges with CBDC News: Central banks around the world have started to issue their own digital currencies (CBDC) but it has challenges too. Why&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/spare-a-thought-for-the-trilemma-of-central-bank-digital-currencies\/\">Continue reading <span class=\"screen-reader-text\">Spare a thought for the trilemma of central bank digital currencies<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[216,10501],"class_list":["post-214369","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","tag-live-mint","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704627411},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/214369","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=214369"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/214369\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=214369"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=214369"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=214369"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}