Global Securities firms envision 87 percent faster settlements with CBDCs: Survey

Citibank's survey unveils global securities firms' eagerness for CBDCs, highlighting their potential to revolutionise settlement cycles and reshape financial landscapes

Shashank Bhardwaj
Published: Aug 25, 2023 01:20:42 PM IST
Updated: Aug 27, 2023 01:28:12 PM IST

Global Securities firms envision 87 percent faster settlements with CBDCs: SurveyImage: Shutterstock

A survey conducted by Citibank has unveiled that 87 percent of global securities firms are looking for central bank digital currencies (CBDCs) to expedite financial settlement cycles. The study highlights the pivotal role that institutional investors, banks, and asset managers play in driving the widespread adoption of CBDCs.

The study delves into the growing interest in CBDCs as a means to streamline local financial settlement processes within the next five years. Highlighting India's move to T+1 settlements, which ensures trade-related settlements are completed within 24 hours of a transaction, the report emphasises the escalating transition efforts in economies like the United States and Canada.

As these economies strive to shift to T+1 settlement cycles, the survey evaluates the significance of distributed ledger technology (DLT), CBDCs, and stablecoins in facilitating this transition. Among the 483 respondents and 12 financial markets infrastructures (FMIs), 87 percent view CBDCs as a viable solution for reducing settlement cycles by 2026, marking a notable 21 percent increase from the previous year's support.

However, the report acknowledges several obstacles impeding the broader integration of digital assets. Regulatory uncertainties, limited awareness, compatibility with traditional financial systems, and blockchain compatibility are cited as key challenges that need to be addressed for widespread CBDC adoption.

Looking ahead, the report anticipates the progression beyond T+1 settlement cycles by 2028, envisioning a landscape characterised by mainstream distributed ledger technologies, abbreviated settlement cycles, digital cash-focused funding mechanisms, and a departure from core banking systems.

Ongoing domestic trials and cross-border initiatives across various jurisdictions underscore a positive trajectory for CBDCs. Citi's analysis highlights cross-border multi-bank experiments that shed light on the operationalisation of central bank funding in digital contexts, both within institutions and across entire markets.

Notably, the Reserve Bank of Australia recently concluded its internal CBDC pilot, demonstrating its potential to foster financial innovation, resilience, and inclusion within the digital economy. The bank believes that CBDCs can revolutionise areas such as debt securities markets and catalyse innovation in emerging private digital currencies, thus enriching the broader digital financial landscape.

The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash

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