Amid Growing Volatility, Kyriba CSO Believes The US Should Develop Its Own Digital Currency
Wolfgang Koester, chief strategy officer of Kyriba appeared on Bloomberg to discuss the increased volatility of the currency market and its effect on the global business trends. Koester said that financial analysts must focus on active liquidity management to avoid volatility issues.
Koester cited the example of Chinese Yuans whose volatility has increased significantly in recent times. Focusing on managing the liquidity, Koester said that the US government is making a mistake by not developing its own digital currency, whereas its competitor China is all set to launch its Central Bank Issued Digital Currency towards the end of this year.
He went on to explain that creating a digital currency would not really impact the market value of the currency, however, it would tremendously streamline the debt settlement and many other complex aspects of the economy. The most important one being instant liquidity where the settlement of bonds and company settlements won't take 2 days as the traditional methods.
Stressing on the importance of digital currencies Koester said,
“Governments around the globe who have seen the bigger picture are already vested in the idea of digital currencies, like China. Their digital currency would open new trade gates as the settlement time would be less, the process would be more transparent and efficient”
“In order to contain the ongoing issue of volatility in currency, government and economists must focus on risk management, they must have access to data and see understand the issues they are facing proactively.”
Koester said digitization might not necessarily decrease the volatility, in fact, volatility will still be governed by market factors and it may actually increase as people would react to the market. much faster than the usual traditional methods. But, the main idea behind creating a digitalized currency should be understanding issues that are causing the current market meltdown and then focusing on eliminating those by streamlining the process.
The Growing Trend of CBDC
China had quite a skeptical take on cryptocurrencies in its early days, they went on to ban crypto exchanges from the country and later they were even thinking about banning crypto mining in the nation. However soon they realized the potential in the underlying tech of blockchain and decided to create a central bank-issued currency that can be used to settle internal financial transactions. Although the development started years back, it was fastened owing to Facebook's libra announcement.
Now several state governments around the globe are pondering over the idea of issuing a state-backed digital currency to Fastrack internal financial settlements. On the other hand countries like Iran and Venezuela have invested in national digital currency to avoid sanctions.