The World Economic Forum looks at CBDC adoption and DLT use cases
The World Economic Forum (WEF) published its dynamic take on CBDCs in a blog post titled “What are Central Bank Digital Currencies (CBDCs)?” on August 31, following plans by the Reserve Bank of Australia’s Central Bank of Australia (RBA) to launch a CBDC pilot.
On August 9, the Reserve Bank of Australia (RBA) central bank announced in a statement that it was collaborating on a year-long research project with the Digital Finance Cooperative Research Center (DFCRC) to explore “cases of ‘use and innovative business models’. to introduce a CBDC in Australia.
In the blog post, the WEF reiterates the definition of the European Central Bank (ECB), which describes CBDCs as a risk-free form of state-backed currency while also predicting that all European states will issue their respective digital euro. by mid-decade.
The blog post goes on to explain that CBDC is a safe asset because it does not carry the risks and volatility inherent in cryptocurrencies. Individuals and businesses can also store CBDCs in the central bank or as electronic tokens on mobile devices, prepaid cards, and other forms of digital wallets.
Digital currency would then be touted as a faster, easier, and more secure way to make everyday payments. This makes CBDC a complement to physical silver, rather than a replacement, according to the WEF.
Regarding the benefits of CBDC for society as a whole, the WEF mentioned that CBDC can help reduce poverty and increase financial inclusion by making it easier and safer to access money. . It can also strengthen the resilience of financial systems in the event of a shortage or unavailability of liquidity, as the CBDC can provide a fallback solution as it is repayable in national currencies. Finally, the potential for using DLT to fight financial crime is also an incentive, as CBDCs can pave the way for improved AML/KYC functionality and money flow transparency.
Besides the RBA, other central banks are also exploring the use of CBDC and distributed ledger technology, according to the WEF Central Bank Digital Currency Policymaking Toolkit. Key use cases include retail CBDCs, for peer-to-peer payments and consumer-to-merchant payments, or wholesale CBDCs, for commercial banks and clearinghouses to leverage more efficient interbank payments. that take place outside traditional correspondents and other payment systems. .
The WEF currently supports central banks in their process of developing, piloting and implementing policies for the adoption of DLTs and CBDCs. He stressed that decisions on how to use technologies should be inferred by looking at inputs from multiple sectors in addition to any possible risks that relatively new technologies may present.
