Central bank digital currencies, or CBDCs, are gaining popularity, with 109 countries actively exploring or engaging with them across various phases of development as of last month, a new report has found.
Forty-five countries are involved in research, 32 in development, while 21 are in the pilot stage of exploration, according to the study compiled by Finbold, a UK-based financial news platform. Eleven countries have already launched their CBDC projects, while two have cancelled their involvement.
The number of countries in advanced exploration phases of CBDC development reached its highest level in June, with 64 countries – a 28 per cent increase from 50 countries in May last year, Finbold said. In June 2021, the total was 41 countries.
"The notion that the rise of cryptocurrencies and stablecoins poses a threat to national currencies has emerged as one of the key drivers behind CBDCs,” the report said.
“In this case, CBDCs respond to this challenge, ensuring central banks keep up with the digital revolution."
CBDCs are the digital form of a country’s money issued by its central bank. They are similar to cryptocurrencies but their value is fixed by the monetary authority and equal to the country's fiat currency.
CBDCs are expected to provide some middle ground for the highly volatile cryptocurrency market. They potentially reduce the risks associated with using cryptocurrency and provide a stable means of exchanging digital assets.
Blockchain, which is an expanding digital chain of transactions linked to each other using cryptography, is the key component of CBDCs. It is a mechanism for secure communications and creates an open ledger to record transactions in real time.
Up to $5 trillion could move to newer digital money formats such as CBDCs and stablecoins by 2030, of which about half could be linked to distributed ledger technology or blockchain, according to a report by Citi Global Perspectives and Solutions.
Governments are also positioning CBDCs to boost the efficiency and safety of retail and large-value payment systems, the Finbold report said. For example, CBDCs can improve cross-border payment efficiency and mitigate counterparty credit risk.
They are also seen as a catalyst for accelerating the shift to a cashless society.
“This transition can lead to reduced costs for central banks, improved traceability to combat vices such as tax evasion and illicit transactions, and enhanced security in fund transportation and payments,” the report said.
Several governments and central banks have taken steps to create frameworks for the implementation of CBDCs into their economies.
In March, the UAE Central Bank began enacting its digital currency strategy, Digital Dirham, as it prepares the country's infrastructure for the future of finance.
It signed an agreement with Abu Dhabi's G42 Cloud and digital finance services provider R3 to be the infrastructure and technology providers, respectively, for the implementation of the CBDC.
However, despite the rapid acceptance of CBDCs, there are some concerns, such as a threat to privacy and operational challenges, the Finbold report said.
Some of the operation challenges include infrastructure development, ensuring interoperability, and managing the transition from cash to digital currency, which could be intricate and expensive for governments and central banks.
“CBDCs could enable governments and central banks to monitor and track financial transactions, potentially compromising individuals’ privacy rights … cybersecurity vulnerabilities also pose a risk,” Finbold editor Justinas Baltrusaitis wrote in the report.
“The digital versions of fiat currency could also impact traditional monetary policy tools, reducing central banks’ control over the money supply and the effectiveness of monetary policy measures.”
While CBDCs offer potential for financial inclusion, there is a risk of exacerbating technological inequalities, as access to the necessary digital infrastructure is not evenly distributed, the report said.
Last month, the International Monetary Fund unveiled plans to create a global platform for the implementation of CBDCs. However, it also warned that if not designed well, they could cause considerable risks for the financial system and economies.
The Washington-based fund’s managing director Kristalina Georgieva said a standardised CBDC platform could help bridge the financial gap.
Terror attacks in Paris, November 13, 2015
- At 9.16pm, three suicide attackers killed one person outside the Atade de France during a foootball match between France and Germany
- At 9.25pm, three attackers opened fire on restaurants and cafes over 20 minutes, killing 39 people
- Shortly after 9.40pm, three other attackers launched a three-hour raid on the Bataclan, in which 1,500 people had gathered to watch a rock concert. In total, 90 people were killed
- Salah Abdeslam, the only survivor of the terrorists, did not directly participate in the attacks, thought to be due to a technical glitch in his suicide vest
- He fled to Belgium and was involved in attacks on Brussels in March 2016. He is serving a life sentence in France
The specs
Engine: 2.0-litre 4-cylturbo
Transmission: seven-speed DSG automatic
Power: 242bhp
Torque: 370Nm
Price: Dh136,814
The biog
Title: General Practitioner with a speciality in cardiology
Previous jobs: Worked in well-known hospitals Jaslok and Breach Candy in Mumbai, India
Education: Medical degree from the Government Medical College in Nagpur
How it all began: opened his first clinic in Ajman in 1993
Family: a 90-year-old mother, wife and two daughters
Remembers a time when medicines from India were purchased per kilo
UAE currency: the story behind the money in your pockets
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
UAE currency: the story behind the money in your pockets
Name: Peter Dicce
Title: Assistant dean of students and director of athletics
Favourite sport: soccer
Favourite team: Bayern Munich
Favourite player: Franz Beckenbauer
Favourite activity in Abu Dhabi: scuba diving in the Northern Emirates
US PGA Championship in numbers
1 Joost Luiten produced a memorable hole in one at the par-three fourth in the first round.
2 To date, the only two players to win the PGA Championship after winning the week before are Rory McIlroy (2014 WGC-Bridgestone Invitational) and Tiger Woods (2007, WGC-Bridgestone Invitational). Hideki Matsuyama or Chris Stroud could have made it three.
3 Number of seasons without a major for McIlroy, who finished in a tie for 22nd.
4 Louis Oosthuizen has now finished second in all four of the game's major championships.
5 In the fifth hole of the final round, McIlroy holed his longest putt of the week - from 16ft 8in - for birdie.
6 For the sixth successive year, play was disrupted by bad weather with a delay of one hour and 43 minutes on Friday.
7 Seven under par (64) was the best round of the week, shot by Matsuyama and Francesco Molinari on Day 2.
8 Number of shots taken by Jason Day on the 18th hole in round three after a risky recovery shot backfired.
9 Jon Rahm's age in months the last time Phil Mickelson missed the cut in the US PGA, in 1995.
10 Jimmy Walker's opening round as defending champion was a 10-over-par 81.
11 The par-four 11th coincidentally ranked as the 11th hardest hole overall with a scoring average of 4.192.
12 Paul Casey was a combined 12 under par for his first round in this year's majors.
13 The average world ranking of the last 13 PGA winners before this week was 25. Kevin Kisner began the week ranked 25th.
14 The world ranking of Justin Thomas before his victory.
15 Of the top 15 players after 54 holes, only Oosthuizen had previously won a major.
16 The par-four 16th marks the start of Quail Hollow's so-called "Green Mile" of finishing holes, some of the toughest in golf.
17 The first round scoring average of the last 17 major champions was 67.2. Kisner and Thorbjorn Olesen shot 67 on day one at Quail Hollow.
18 For the first time in 18 majors, the eventual winner was over par after round one (Thomas shot 73).
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Innotech Profile
Date started: 2013
Founder/CEO: Othman Al Mandhari
Based: Muscat, Oman
Sector: Additive manufacturing, 3D printing technologies
Size: 15 full-time employees
Stage: Seed stage and seeking Series A round of financing
Investors: Oman Technology Fund from 2017 to 2019, exited through an agreement with a new investor to secure new funding that it under negotiation right now.
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