(Srinivasan Kalyanasundaram, Professor of Practice Finance, IFMR GSB, Krea University and Sanjana Mattaparthi, Student, SIAS, Krea University)
Abstract
This paper investigates the potential of Central Bank Digital Currencies (CBDCs) to revolutionize inclusive finance and international payments. While cryptocurrencies emerged as disruptive, their inherent volatility and uncertain legal status challenge broader adoption in inclusive finance and international payments. CBDCs, backed by central banks, offer a distinct advantage: stability and legal certainty.
This research explores the impact of CBDCs on financial inclusion and international payments. We argue that successful interoperability is critical to unleashing the full potential of CBDCs. Interoperable CBDCs promise to facilitate faster, cheaper, and more transparent cross-border transactions. Interoperable CBDCs hold the promise of facilitating faster, cheaper, and more transparent cross-border transactions. Additionally, this paper suggests few key improvements in CBDC implementation, which can make CBDCs more attractive and faster adoption for international payments and inclusive finance.
The paper contends that CBDCs are likely to coexist with the existing financial instruments, playing a leading role in the future of finance. Their unique features and advancements in blockchain interoperability position CBDCs as a stable and secure foundation for a more inclusive and efficient financial landscape.