Central bank digital currencies (CBDCs) have become the rave of the moment following the global outcry for a more efficient and inclusive financial system.
With the economic impact of the pandemic, the need for a digital form of value transmission has never been higher than now. National banks are rapidly rolling out CBDC programs to address this growing demand.
The latest in a long list of apex banks is the National Bank of Georgia.
Digital Gel On The Horizon
In a release posted on its website, the National Bank of Georgia (NBG) said it would be commencing a central bank digital currency (CBDC) program joining a list of national banks in the process.
According to the apex bank, this enhances the domestic payment system efficiencies and promotes financial inclusion for the underbanked in the country. To help it on this journey, the NBG said it would be accepting participants from the private sector.
In what is termed as a public-private partnership (PPP), it said private technology firms, fintech companies, and other interested financial institutions are welcome to aid in creating a “digital GEL,” named after the country’s official currency, the Georgian Lari.
However, the apex bank warns that despite its crypto efforts, its first mandate to maintain price and financial stability in Georgia remains. The official announcement says,
“CBDC holds the promise to unlock the tremendous value of innovative business models for the benefit of society. The introduction of CBDC could increase financial intermediation efficiency, help introduce new financial technologies, facilitate financial inclusion, and reach previously unbanked populations. It could also increase monetary policy efficiency by improving monetary policy’s monetary transmission mechanism and welfare effects for the society.”
The former Soviet region financial regulator said that it would be adopting the Bank for International Settlements’ (BIS) 2020 guiding principles in creating a Digital GEL wherein a set of rules for a successful CBDC program was listed.
Also, it noted that there were inherent risks attributed to CBDCs given the fact that it is a completely new and potentially disruptive technology. To ensure sound risk management, it would be creating a regulatory sandbox for potential partners to test the CBDC deployment in a controlled environment. This will see it use its Open Regulatory Framework tools to measure the economic impact of a possible CBDC use.
Meanwhile, no launch date has been chosen, and the project is still in the works.
Georgia’s Impressive Crypto Resume
Given its small population size of just 3.7 million people scattered across its Mountain Villages, Georgia is one of the smaller economies looking to join the CBDC frenzy.
But this does not make it negligible, given that the Georgian state has been active in the crypto space as far back as 2017.
In a move that saw it become the first national government to allow land authentication with blockchain, the Georgian state signed an agreement with BitFury to use the Bitcoin network to record land titles.
It also became the powerhouse of European crypto mining after hosting the world’s third-largest crypto mining operation. It also went further and concluded a deal with Cardano’s parent company IOHK in 2019 to aid in public sector administration, especially in education.
These decisive steps have since brought the Georgian state into the global blockchain community. They have since made former Prime Minister Mamuka Bakhtadze remarked that blockchain could do what the steam engine did for the first industrial revolution in an interview with Cointelegraph. According to Bakhtadze, blockchain could become the catalyst for the fourth industrial revolution.