Securities Firms Eye CBDCs as Financial Settlement Cycles Look to Shorten
Summary:
Discussions around shortening financial settlement cycles within the next five years have securities firms eyeing central bank digital currencies (CBDCs), according to a report by Citi. The report highlights India's move to T+1 settlements and shows that 87% of respondents see CBDCs as an option for shorter settlement cycles by 2026. However, challenges such as regulatory uncertainties and limited knowledge remain for widespread adoption. Institutional investors, banks, and asset managers are crucial for the adoption of CBDCs and other digital assets. The report envisions the mainstreaming of distributed ledger technologies and shorter settlement cycles by 2028. The Reserve Bank of Australia has also completed its CBDC pilot, suggesting potential benefits for financial innovation and inclusion.
Most securities firms are considering central bank digital currencies (CBDCs) as discussions arise about shortening local financial settlement cycles in the next five years, according to a white paper released by banking giant Citi. The paper emphasized India's recent adoption of T+1 settlements, ensuring trade-related settlements conclude within 24 hours. Citi's survey showed that 87% of respondents, including 483 survey respondents and 12 financial markets infrastructures (FMIs), see CBDCs as a viable option for shorter settlement cycles by 2026, with a 21% increase in support among securities firms compared to the previous year. The growing support for digital fiat currencies is backed by domestic initiatives and cross-border experiments. However, the widespread adoption of digital assets still faces challenges such as regulatory uncertainties and limited knowledge. Institutional investors, banks, and asset managers are highlighted as key players who can scale and deliver marketwide solutions, which will be crucial for the widespread adoption of CBDCs and stablecoins. According to Citi's report, financial aspirations by 2028 include the mainstreaming of distributed ledger technologies (DLTs), shorter settlement cycles, digital cash-focused funding mechanisms, and the removal of core banking systems. In other related news, the Reserve Bank of Australia recently completed its in-house CBDC pilot, believing that a CBDC may support financial innovation and promote resilience and inclusion in the digital economy.
Published At
8/23/2023 8:31:27 AM
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