The World Economic Forum (WEF) published a resource suite about digital assets, including central bank digital currencies (CBDCs) and stablecoins. More than 85 members of the WEF Digital Currency Governance Consortium contributed eight white papers to inform lawmakers and individuals in the private sector.
The World Economic Forum announced on Friday its Digital Currency Governance Consortium White Paper Series, a resource suite created by 85 organizations from 40 countries around the world. The publication contains eight separate white papers exploring topics such as the impact of lawmakers regulating CBDCs and stablecoins and informing readers about their risks, benefits, and alternatives. In addition, the suite addresses regulatory gaps for digital assets and their potential uses in further financial inclusion and cross-border aid.
“If the central bank decides to grant cross-border access to the CBDC and it wants to support interoperability with foreign CBDCs, then it needs to create communication protocols and standards to enable domestic and foreign CBDCs to exchange information seamlessly,” WEF stated.
Other areas affected by interoperability include KYC/AML procedures, the role of intermediaries, and user privacy.
Anne Richards, CEO of Fidelity International, one of the companies that contributed to the white papers, said on the publication:
“Investor and consumer protections continue to be imperative for cryptocurrency and stablecoins. The Digital Currency Governance Consortium focuses on this important topic, making a valuable contribution in mapping consumer risks and regulatory gaps to inform future policy-making.”
WEF also listed universality, technical standards, and payment settlement as important requirements.
“In terms of implementation technology, central bank digital currencies can make use of a combination of different technologies such as traditional centralized databases and systems, shared databases, or distributed-ledger technologies. In this context, achieving interoperability is complex given the different technology options being used,” the report added.
WEF’s paper compared China’s CBDC to the Swedish Riksbank’s e-krona and the Bank of Thailand’s CBDC. It’s worth noting that while China and Sweden’s CBDCs are meant for retail use, Thailand’s CBDC is aimed at B2B payments. Nevertheless, the three digital currencies shared some other features and design principles.
However, interoperability was where things took a turn. WEF’s paper concluded that China’s CBDC required a specialized wallet linking to other payment systems. In particular, WEF confirmed China was working on the mCBDC Bridge Project for cross-border remittances and B2B use cases on an international scale.
Coming to Sweden, the CBDC is still in the test phase. However, WEF stated that the e-krona could be connected to the real-time gross settlement (RTGS) system, which would let it meet other payment systems.
According to the WEF, different world governments could benefit from collaborations on CBDCs and stablecoins in addressing illicit activity, consumer protection, and cross-border arrangements regarding CBDCs where regulatory gaps might exist. The organization’s white paper on addressing regulatory gaps specifically cites a potential lack of cybersecurity to create a “full-blown systemic financial crisis” should a bug or other exploit to compromise a digital currency.
The WEF framework proposes to prevent and address gaps and inconsistencies in CBDCs and stablecoins involves having agencies form a task force composed of senior leaders focused on certain risk areas and those involved in setting some of the current standards on digital assets. According to the white paper, this approach could “lay the foundation for sustainable innovation, align regulatory frameworks and foster greater levels of international collaboration.”
The new resource suite follows the WEF releasing guidance for regulators and policy-makers concerning regulations in decentralized finance (DeFi) in June. The organization said at the time, the publication offered a foundational basis for examining critical factors concerning DeFi regulations.