Mastercard’s executive director Ajay Banga supports CBDCs on crypto, saying the latter’s volatility is deterring new investors
While the financial services firm is committed to connecting 1 billion people to the banking system, the executive sees no significant impact of cryptocurrencies on reaching the milestone.
Banga believes that because of its volatility, Bitcoin is not an ideal tool for financial inclusion, especially for non-banks. According to him, CBDCs are a more practical solution if virtual currencies are to be integrated into the financial inclusion landscape.
Crypto’s volatility is a stumbling block
Banga argues that the financially marginalized population needs inclusion services with currencies similar to standard fiat money. Bitcoin and other cryptocurrencies are impractical in this regard. He added that the excluded population is finding very little benefit in using volatile assets in place of traditional currencies.
“Bitcoin itself is volatile in its valuation. Can you imagine someone financially barred from trading to be absorbed by a currency that could cost the equivalent of two bottles of Coca-Cola today and tomorrow? That’s not a way to get it. That way they are afraid of the financial system. “
It has already been argued that cryptocurrencies like Bitcoin are an affordable solution for the population without banks when compared to transaction alternatives like lenders. Banga explains that the cost advantage is eliminated by price fluctuations.
Central bank digital currencies are a practical solution
Mastercard’s global test platform, designed to help banks evaluate their CBDC use cases, is in the testing phase. The platform will also be helpful in assessing the operational framework for proposed digital currencies.
Banga, a proponent of CBDCs, stated that CBDCs are the way forward, although they are not yet widely used.
“If fiat currencies were digitized, they would be helpful for cross-border trade flows and improve their efficiency – yes, sure,” he said.