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The Central Bank of Malaysia is exploring the possibility of creating a native central bank digital currency and considering its effects on the local economy. The bank wishes to be prepared if a need to launch its own CBDC arises, but it also wants to know if launching a native CBDC would benefit the nation.
According to the email that the so-called Bank Negara Malaysia sent to Bloomberg, it is in the process of “assessing the value proposition of [a] central bank digital currency (CBDC) to Malaysia.”
The bank stressed that it did not yet bring a decision to issue a central bank digital currency. Instead, it focused its research via proof-of-concept and experimentation to enhance its technical and policy capabilities.
Last year, in September, the bank joined Project Dunbar, which is dedicated to testing the utility of CBDCs in international settlements. Traditionally, international payments are slow — often requiring days to be processed — as well as costly. The use of digital currencies has brought near-instant international settlements that usually cost only a fraction of the cost.
This is the reason why so many other countries around the world have found CBDCs worth pursuing. The Bank of International Settlements (BIS), which is also a member institution on the project, noted that the project’s results so far have been highly promising. The Bank further noted that a multi-CBDC platform should be considered, as it could significantly improve international payments.
The BIS also noted that there were numerous challenges and questions surrounding the feasibility of CBDC that would be used in cross-border payments, in the early days of CBDC development. However, the institution believes that most of these issues have since been addressed thanks to the programmable nature of smart contracts and CBDCs.
The Central Bank of Malaysia addressed the crypto industry in the past, in its Annual Report for 2020. However, back then, it warned about the industry’s volatility, scalability problems, and vulnerability to online threats, such as hacking attacks. It argued that the mentioned problems make digital assets poor currencies.
However, even back then, it was still keeping the benefits in mind and weighing its options. It concluded that CBDCs should not be considered “an end in itself,” but rather tools to achieve broader public policy outcomes.
So far, a number of countries have started developing their own CBDCs and issuing them, such as Nigeria and China, whose digital coins are already operational. Meanwhile, multiple other nations have started collaborating in their research of the CBDCs, such as Canada, the US, Mexico, and England.