The World Economic Forum (WEF) recently released a report on wholesale central bank digital currencies (wCBDCs), exploring ongoing initiatives, potential use cases in financial markets, and the potential of wCBDCs to alleviate significant industry challenges and address key pain points. The report revealed that over 98% of central banks worldwide are conducting research, pilot programs, or implementation of CBDCs to enhance the functionality of and broaden access to central bank money (CeBM). It states that wCBDCs could unlock new economic models and integration points not possible today.
CeBM is seen as ideal for systemically important transactions due to its characteristics. It eliminates credit and liquidity risks, aligns with recommendations for critical transactions, facilitates final settlement, and promotes financial stability by acting as a risk-free instrument without introducing additional risks. The use of CeBM in interbank payments and securities transactions can significantly contribute to the efficiency and stability of the financial system.
One of the challenges identified in the report is the issue of disparate settlement cycles in cross-border securities settlements. Globalization of capital markets requires harmonized settlement cycles, but most real-time gross settlement (RTGS) systems operate within limited windows. To address this, the report suggests that wCBDC could facilitate a global settlement window, extending the reach of RTGS systems by offering near 24/7 operation. This is just one example of how wCBDC technology could offer significant value in modernizing the industry.
The report offers key findings to facilitate further exploration of wCBDC and hopes to serve as a foundational step towards a more efficient, responsible, and secure future for financial markets. It highlights the potential of wCBDCs to address challenges within the industry, such as disparate settlement cycles, and improve efficiency and stability in interbank operations. By leveraging the characteristics of CeBM, wCBDCs have the potential to transform the way financial transactions are conducted and provide new economic models and integration points that were previously not possible.
Overall, the report emphasizes the importance of ongoing initiatives and research around wCBDCs, as central banks worldwide are increasingly exploring the potential of implementing CBDCs to enhance the functionality of central bank money. With the potential to address key industry challenges and improve efficiency in financial markets, wCBDCs have the opportunity to unlock new economic models and integration points that could reshape the future of the industry. The report aims to spark further exploration and discussion around wCBDC technology and its potential to drive innovation and progress in the financial sector.
