What the World Economic Forum’s global report on central bank digital currencies reveals, BFSI News, ET BFSI
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Research on the feasibility and real-world applications of central bank digital currencies (CBDCs) is continuously going on. While some renowned research organizations have studied and investigated it in the past, the World Economic Forum (WEF) is the most recent one to do so. On November 19, the WEF published a first-of-its-kind global report to help lawmakers and the private sector grasp the principles and regulations around CBDCs and stablecoins.
The resource suite compiled by the WEF consists of eight white papers that have been contributed by the WEF Digital Currency Governance Consortium on stablecoins and CBDCs. The consortium comprises over 85 private and public-sector member organizations from over 30 countries of the world and is by far the largest one and featuring a great diversity of stakeholders and public-private collaboration from various groups including. members of civil society and academia. The resource suite was developed after an analysis of 18 months.
- The eight white papers in the report are :
- The Role of the Public Sector and Public-Private Cooperation in the Era of Digital Currency Growth
- Regulatory and Policy Gaps and Inconsistencies of Digital Currencies
- Digital Currency Consumer Protection Risk Mapping Paper
- What is the Value Proposition of Stablecoins for Financial Inclusion?
- Blockchain-Based Digital Currency and Tools for Cross-Border Aid Disbursement
- Privacy and Confidentiality Options for Central Bank Digital Currency
- Defining Interoperability Paper 8 CBDC Technology
- CBDC Technology and Considerations
The eight papers of the report have established the following facts :
- The first paper concludes the following:
- Policy-makers in both public and private organizations should plan their approach to stablecoins and CBDCs, considering the domestic conditions, policy goals and political-economy constraints.
- Stablecoins are riskier to regulate, with their rapidly-growing issuance and limited regulatory coverage.
- CBDCs are relatively safer to regulate due to their limited issuance and the lower possibility of foreign access with initial deployment.
- The second paper throws up the following:
- Gaps and inconsistencies are being faced by private and public sector players in exploring the full potential of digital currencies.
- These gaps are due to insufficient policy development in relation to innovation.
- The policies should focus on creating both domestic and cross-jurisdictional coordination structures.
- The third paper emphasised the need for adequate consumer education about the risks and potential of stablecoins.
- The fourth paper presents the risks posed by stablecoins and capacities that need to develop to benefit the unbanked and underserved users.
- The fifth white paper raises the need to engage with the government, tech firms, aiding agencies and the public to utilize the blockchain-based technology for the betterment of the masses, governance and especially the underserved.
- The sixth paper underscores the following points:
- Ensuring privacy of a CBDC system is most vital, and needs regular engagement across public and private sectors.
- A forum should be developed where governments and other stakeholders can correctly communicate their objectives about security and cryptographic solutions.
- The seventh paper focuses on the need for ensuring interoperability, the ease of using different digital payments easily along with financial services.For this businessmen, policymakers, technologists and regulators need to collaborate with each other.
- The last paper analyses the following:
- Key technology considerations and choices for CBDC to meet various policy goals.
- Merits and demerits of using blockchain as a primary part of CBDC technology infrastructure.
- Crucial cybersecurity vulnerabilities for CBDC.
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