CBDC:DISRUPTIVE EVOLUTION

The digital age has clearly arrived， and the money aswe know it is undergoing a digital transformation just likeeverything else.

Digital payments have become globally ubiquitous with theadvent of mobile phone-based apps that facilitate spendingand banking. CBDC， or central bank digital currency， is partiallydesigned to defend against encroachment on sovereignmoney by cryptocurrencies like Bitcoin.

On the surface， CBDC is simply a digital form of thecurrency issued by central banks and a bigger leap towards acashless world. Nonetheless， its profound implications mightextend beyond the realm of a specific country’s bankingsystem.

Generally， the two main types of CBDC are wholesale，which is only available to commercial banks， and retail， whichis available to all. A CDBC payment system doesn’t requirephysical infrastructure， and its efficiency， low cost， and ease ofuse benefit consumers and businesses alike.

The appeal of this technology is greater in countrieswhere per capita incomes are low， transactions are small， andphysical bank branches are few. The concept greatly improvesfinancial inclusion， as evidenced by the early movers like theBahamas， Nigeria， and Cambodia， where millions of unbanked and underbanked are finding new access to financial services.

It is intriguing that emerging market economies are leading the way in the sphere of CBDC， as the transformative potential and the benefits that accrue from these changes are far greater in developing economies than in richer ones with more sophisticated financial systems.

If the concept creeps beyond national borders as many have envisioned， an interlinked CBDC system could eventually challenge the dominance of the U.S. dollar in the global financial regime. Bakong is known for promoting usage of the Cambodian riel over the U.S. dollar， which still dominates transactions in Cambodia. The EU’s plans to strengthen the euro over the dollar include creation of a digital euro. China’s efforts over the years to globalize its currency have made even more global headlines than the EU’s. The quick rise of the digital yuan has undoubtedly added fuel to speculation over the yuan’s ability to rival the dollar.

CBDC is still early in its development. Most countries are only starting to explore the idea. Yet clear signs are emerging that CBDCs will reshape the current financial landscape， mostly likely in a fundamental way.