Over 98% of central banks interested in CBDC

The World Economic Forum (WEF) recently published a report examining the introduction of wholesale central bank digital currencies (wCBDC). This document analyzes ongoing initiatives, potential applications in financial markets, and the possibility of using CBDCs to address significant industry challenges.

According to the report, over 98% of central banks worldwide are conducting research, pilot programs, or CBDC implementations to improve functionality and expand access to central bank money (CeBM).

"CeBM is ideal for systemically important transactions despite the emergence of alternative payment instruments," the report states. "Wholesale central bank digital currency (wCBDC) is a form of CeBM that can unlock new economic models and integration points that are not possible today."

The report argues that CeBM is a particularly suitable choice for interbank payments and securities transactions due to several key features. Firstly, CeBM eliminates credit and liquidity risks, in line with the Principles for Financial Market Infrastructures (PFMI) recommendations for key transactions. This reduces the possibility of financial instability arising from these areas.

Secondly, CeBM facilitates the final settlement of transactions. Supported by a robust legal framework, it ensures irreversible asset transfers, enhancing trust and stability in the financial system.

Finally, CeBM promotes financial stability by acting as a virtually risk-free tool. It complements existing credit creation processes without introducing additional risks, ensuring a healthy financial ecosystem.

The report also identified eight longstanding industry challenges, four of which were particularly highlighted as areas where wCBDC could bring significant value. These areas represent opportunities for modernization through wCBDC technology.

According to the report, wCBDC could facilitate a global settlement window, effectively extending the reach of RTGS systems by offering nearly 24/7 operations.

"This report provides key insights to facilitate further research into wCBDC and hopes to be a step towards a more efficient, responsible, and secure future financial market," it said.