Mumbai: Central banks around the world should consider bringing cryptocurrencies into the regulated space, although non-fungible tokens (NFT) or stable coins will not replace fiat currency, said Piyush Gupta, CEO of DBS Bank Group during an interaction .

Speaking at The Economic Times Global Business Summit, Gupta said there is a better use of wholesale cross-border digital currencies from central banks (CBDC).

“I don’t think crypto will become money as we know it, but it could be an alternative to gold and its value,” Gupta said. “The other big challenge is volatility in value. If you want to use this to pay for something, you don’t know what it will cost you. Today cryptos are a potential source of speculated value, it’s unlikely to be a source of money like we know it.”

Gupta said central banks around the world should look at regulating cryptos.

“Regulating it out of the formal banking system is an unwise thing to do because you want to push it into the unregulated space and then you have no way of creating guardrails,” he said. “No one knows who owns private money so it is subject to abuse. That is what the RBI governor is so concerned about, monetary systems around the world have highlighted AML and KYC issues related to crypto.”

Speaking about specific use cases of a CBDC, Gupta also said the introduction of such currencies could lead to disintermediation in the banking system.

“CBDCs have their own set of challenges. If you go direct, every citizen opens a direct account with the central bank and pays out the CBDC directly,” he said. “The downside of this is that it will destroy the existing banking system, therefore you make the process of credit creation the burden and responsibility of the central bank alone and they don’t want that.”

Gupta added that while monetary authorities around the world may sooner or later introduce this new form of fiat currency, a wholesale CBDC makes for better use.

“There will be digital money, some regions will try retail CBDC, but I think there is a much greater use of CBDCs for wholesale, especially cross-border,” he said.

Gupta also said that central banks and top institutions around the world should look at ways and means of leveraging blockchain technology.

“The foundation of crypto or CBDC is blockchain, which allows you to establish trust without a hub in the middle,” he said. “Recognizing that the technology has the power to turn the idea of ​​a hub-and-spoke model into a distributed model, that’s a very important concept.”

Gupta said blockchain technology has the power to change the world’s back office.

“It could change how trade finance is processed, it could change how payments and settlements work, it could change how exchanges work,” he said.

Commenting on the war between Russia and Ukraine, Gupta said that while the world had benefited from the peace dividend of recent years, a world split would be a huge loss. “The events of the past week have given me a reason to pause,” he said. “It worries me that if we get a split world like economic and technological blockages, life will become a lot more challenging. We have all benefited from the peace dividend over the past 50-60 years and if we don’t have that, we will have a have to find a difficult way out.”

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