Mastercard Says Robust Payment Networks Prevent Need for Retail CBDC

Mastercard said the widespread adoption of central bank digital currencies (CBDCs) faces challenges due to consumer comfort with traditional forms of money.

CBDCs would have to be as widely accepted as cash to ensure user convenience, Ashok Venkateswaran, Mastercard’s blockchain and digital assets lead for Asia Pacific, told CNBC in an interview posted Thursday (Nov. 16).

Venkateswaran differentiated between retail CBDCs for everyday transactions and wholesale CBDCs for interbank settlements, according to the report.

While the International Monetary Fund (IMF) recognizes CBDCs as a safe and low-cost alternative to cash, only 11 countries have adopted them so far. However, 53 countries are in advanced planning stages of adopting CBDCs and 46 are researching the topic, the report said, citing data from the Atlantic Council.

Building the necessary infrastructure for CBDC adoption requires time and effort, according to the report. Nevertheless, central banks are increasingly collaborating with private companies like Mastercard to develop the ecosystem required for CBDCs.

Despite these efforts, Venkateswaran said consumers are satisfied with traditional forms of money, limiting the justification for widespread CBDC adoption, per the report.

Mastercard has actively participated in CBDC testing and development, the report said. The company completed testing its solution in the Hong Kong Monetary Authority’s e-HKD pilot program, which simulated the use of a retail CBDC. The pilot involved 16 companies, including Mastercard’s rival Visa, from the financial, payments and technology sectors.

Venkateswaran cited Singapore as an example where a retail CBDC may not be compelling due to the city-state’s efficient payment system, per the report. However, he noted the case for a wholesale CBDC for interbank settlements. Singapore’s central bank has announced plans to pilot the live issuance and use of wholesale CBDCs beginning in 2024.

Ultimately, the adoption of CBDCs depends on the specific needs and challenges faced by each country, Venkateswaran said, per the report. While CBDCs may be beneficial for countries with less robust domestic payment networks, they may not be necessary for countries with efficient existing systems.

Retail CBDCs have also come under strong political fire in the United States, with lawmakers introducing bills attempting to ban their development, PYMNTS reported in September.

Others have challenged the need for a retail CBDC, saying its potential costs outweigh its efficiency.