Digital Currency Governance Consortium White Paper Series
The ‘Digital Currency Governance Consortium White Paper Series’ by the World Economic Forum (WEF) is more than just a mouthful. It is a comprehensive look into necessary considerations surrounding various subsets of the digital asset sector – one of those being Central Bank Digital Currencies (CBDCs).
With regards to CBDCs, the WEF has come to a few broad conclusions surrounding the following.
Privacy / Confidentiality
If privacy isn’t at the forefront of consumer’s minds, it should be. In an increasingly interconnected world, this basic right has become somewhat of a luxury. For any future CBDCs to thrive, this is a trend that must be bucked.
Recognizing this, the WEF states that, “privacy in CBDC will require a dynamic and nuanced approach to technical design and choices…Policy-makers will need to develop forums in which governments and other stakeholders can accurately communicate their goals, while exploring the potential of cryptographic, security, identity and other technology solutions. Without such a space, policy-makers will run the risk of adopting an approach without a full view of non-regulatory tools available to achieve desired privacy and compliance goals.”
With that vast majority of countries now considering the launch of their own CBDCs, along with subsets of the asset class (wholesale vs. retail), interoperability is genuine concern if these currencies are to succeed.
WEF believes that, “It is critical to reiterate the importance of having a common definition of interoperability for the digital currencies…This will require collaboration between business operators, policy-makers, technologists and regulators throughout early conceptual conversation and planning…Adopting shared standards would create common ground for the implementation of interoperable digital currencies and technical aspects of their exchange.”
When addressing technological considerations of how CBDCs will/should function, the WEF utilized a simple pro and con approach.
While building a CBDC with something like distributed ledger technologies (DLT) has its perks, no technology is perfect. In this case, the potential for disruption through quantum computing, double spending, credential loss, and more are each listed as hurdles which must be cleared. Naturally, the typical benefits associated with DLT (increased efficiency, decreased cost, increased speed, etc.) each remain valid.
For a full look at how the WEF arrived at these conclusions, make sure to check out the comprehensive White Paper Series HERE.
Peru Joining the Race
Like many other countries, Peru has recently announced its intent to develop and launch its own CBDC. This announcement, which was made by Peru’s Central Reserve Bank (BCRP) President Julio Velarde at a recent conference, highlighted a few insights in to the country’s developmental approach.
Velarde indicated recognition that Peru, “…won’t be the first, because we don’t have the resources to be first and face those risks.” With that in mind, Peru has decided to piggyback on the findings and development process of larger nations which are further along – notably Singapore, Hong Kong, and India.
Brazil Preparing for Pilot
While Peru may just be taking a CBDC more seriously now, neighbouring nation Brazil has already been hard at work on the subject for some time. In a recent statement, Central Bank of Brazil (BCB) President Roberto Campos Neto shed some new light on its progress.
The Brazilian CBDC which is scheduled to launch sometime in 2024, is nearing its first pilot launch. This event is expected to occur in the coming months, as digital assets continue to explode in popularity within the South American nation.
In addition to the development of the CBDC itself, Campos Neto also indicated that considerations are already being paid towards regulating such an asset, and the creation of a bill to do so.