The Netherlands joins the race to develop a digital currency
Dutch central bank hopes CBDC could “foster trust in the monetary system in times of uncertainty.”
De Nederlandsche Bank, the Dutch central bank, has signalled its ambition to be at the vanguard in the development and implementation of central bank digital currencies (CBDCs).
In a memo, the bank noted that the use of physical cash is “clearly” diminishing in the Netherlands and stated: "A question that naturally springs to mind is whether central banks should provide a new type of money that is better attuned to the needs of citizens and firms."
In the central bank’s eyes a CBDC would "promote diversity in the payments market" and facilitate cross-border payments.
The Netherlands is comparatively late to the game of central banks declaring their ambition to lead the charge in the creation of digital currencies.
Last year Francois Villeroy de Galhau, governor of the Banque de France, announced his desire for France to “take up this call for innovation.” Earlier this year, the central banks of the UK, Switzerland, Japan, Sweden, Canada and the euro zone have established an initiative to share their research into and development of CBDCs.
While only this month, Yifei Fan, the vice-governor People’s Bank of China maintained: “The PBoC will unswervingly further its research and development of the national digital currency with enhanced top-down design.”
De Nederlandsche Bank stated that a digitised national currency could help “foster trust in the monetary system in times of uncertainty.” While digital currencies certainly provide greater transparency and traceability, there are concerns that the technology could actually limit liberty rather than foster trust.
Unlike physical cash, a digital fiat currency with wallets provided by central banks would provide the state with much more of an insight into the spending habits and everyday actions of individuals.
Indeed, it is not only China with its “top-down” system which is interested in the opportunities afforded by the revolutionary technology. An internal presentation given in 2019 to the governor and board of directors of the Bank of Canada argued that personal details gleaned from those using a digital version of the Canadian dollar “could be shared with police or tax authorities”.
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