Diving into state-backed digital currencies

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Hello readers,

Everybody’s talking about fintech, and for good reason. Fintech firms have the potential to topple legacy institutions, leveraging on new technologies to completely change our relationships with financial products and services.

But that doesn’t mean these large institutions are going to take things lying down. Central banks – which manage the currency and monetary policy of a country, as well as its banking system – are rolling out their own forms of digital currency which could have an effect on the fintech ecosystem as a whole.

Today, we look at,

• The potential impact of central bank digital currencies, also known as CBDCs
• How this Vietnamese insurtech startup is making the filing of health insurance claims a little easier
• Other newsy highlights such as WhatsApp’s new feature and China’s draft anti-monopoly rules for its tech giants

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PREMIUM SUMMARY

Holla holla, digital currency for your dollars

Fintech is an exciting sector, and a new dimension has been added to the conversation with the arrival of central bank digital currencies. CBDCs are a digital representation of money issued by a central bank, either in place of or as a complement to physical cash.

• Backed by the bank: CBDCs, much like cryptocurrency, can help make cross-border transactions more efficient through digital ledgers or smart contracts, removing the need for intermediaries. Unlike cryptocurrency, CBDCs are issued by the central bank of a country, which could help them quickly gain trust and adoption among consumers and the financial system.
• Why digital currency? Central banks are turning to CBDCs for various reasons. They want to maintain control over money supply and transactions in a time where fintech innovations are rapidly evolving and expanding. Plus, CBDCs increase the efficiency of monetary policies and fiscal stimulus, opening up channels for money to be distributed outside of traditional banks.
• It’s early days yet: CBDCs could potentially revolutionize cross-border transactions, in conjunction with smart contracts, and help reduce foreign settlement risk. Additionally, CBDCs have implications for the economy and for business, as the presence of an open platform based on a commercially neutral CBDC could help smaller fintech players. But only time will tell what the impact of this new form of digital currency will be.

Read more: Are state-backed digital currencies a game-changer?

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