A panel of central banks and global technology providers from the World Economic Forum (WEF) has identified Central Bank Digital Currency (CBDC) as the future of central bank money and one of the solutions to today’s payment as one of the solutions to the limitations in today’s payments sector. However, they also stated that they still present some limitations that need to be addressed.
WEF Panel Explains Benefits of CBDCs
The Central Bank Digital Currency Panel, part of the World Economic Forum’s (WEF) Davos meeting, highlighted its high hopes for central bank digital currencies (CBDCs) as part of the future of central bank money.
The panel of central bankers, including Julio Velarde, governor of the Central Bank of Peru, Lesetcha Kganyago, governor of the South African Reserve Bank, and Amir Yaron, governor of the Central Bank of Israel, noted several advantages that these new financial tools would bring, but also highlighted the difficulties of efficiently They also highlighted the difficulties in implementing them efficiently.
Governor Berarde explained that, in his opinion, CBDCs are emerging as a solution for payments and credit that goes beyond bank consolidation. The significance of central banks building these tools is to establish standards and to integrate private banks into the loop, while at the same time providing financial inclusion to those who are still outside the traditional banking system. On this he saysthe following:
We have learned the hard way that the revolution has to come from the central banks, we don’t know how CBDC will be implemented… We are watching closely to see what happens around the world.
Governor Amir Yaron explained that payments are now part of the forefront of financial markets, which is why central banks are now interested in them For Yaron, CBDC could have a transitional function between the digital world and private banking institutions. He stated.
We are looking at faster payments, smart contracts, e-money, crypto assets, stablecoins, and CBDC is a public good that is complementary, but can crowd out some of these things CBDC is a bridge between the new digital economy and the standard economy It could be a bridge.
Israel is experimenting with CBDC. The Bank for International Settlements (BIS) is cooperating on a CBDC-based cross-border settlement between Israel, Norway, and Sweden, and the Central Bank of Israel is participating in the project Icebreaker
A smarter solution, but with caveats
For Governor Kuganyago, one of the main challenges for more than 100 banks at the global level studying CBDC is to modernize the payment system by breaking through the digital gap to include new types of money, including cryptocurrencies, which are now emerging as an alternative to central bank issued money.
In this sense.