21 March 2024 04:00 am Views - 503
By Nishel Fernando
The senior representatives of the financial sector yesterday raised significant concerns about the government’s commitment to enacting the necessary legislation for the introduction of a central bank digital currency (CBDC) in Sri Lanka.
Sri Lanka moving towards digital currencies came under fresh spotlight at BankTech Asia 2024: Colombo.
Addressing a panel discussion, Lankapay Chairman Dr. Kenneth De Zilwa expressed scepticism about the feasibility of the proposed CBDC and questioned the government’s political will to push through the necessary legislation.
“This can be developed in sandboxes but it can’t come into reality without legislation,” said Dr. De Zilwa.
Earlier this year, it was stated before the Committee on Ways and Means, in Parliament, that the Central Bank had initiated the process to introduce a CBDC by the end of the year. The first step in this process was expected to be the proposal of a proof of concept to the Central Bank board, before moving on to a pilot programme.
According to an International Monetary Fund report published in September 2022, Sri Lanka had plans to provide the Central Bank with the necessary legal authority to issue a CBDC.
Meanwhile, Commercial Bank of Ceylon Chief Information Officer Sumudu Gunawardena pointed out that a CBDC presents the most significant opportunity to rapidly transform the country’s economy within a short period of five years. He also noted that the country could significantly crack down on corruption by embracing digital currencies.
According to the Central Bank officials, 45 percent of financial transactions in the country remain unregulated, hence, they believe that the introduction of a CBDC would enable the Central Bank to regulate this market. CBDCs operate on a secure, transparent blockchain network. It uses the blockchain technology to create an immutable record of all transactions.
Reflecting similar sentiments, Central Bank Governor Dr. P. Nandalal Weerasinghe highlighted the key benefits of a CBDC, such as enhancing the efficiency and resilience of the payment system to increase financial inclusion. The other potential benefits of a CBDC include more effective monetary transmission and improved financial transparency.
However, ensuring data privacy and consumer protection is considered to be a paramount concern in the current discourse around a CBDC.