WEF backs CBDC and DLT

Following the Reserve Bank of Australia’s (RBA) decision to begin its own central bank digital currency (CBDC) initiative, the World Economic Forum (WEF) has now published its perspectives on the central bank digital currency (CBDC).

WEF Takes on CBDC

The Reserve Bank of Australia (RBA) issued a statement on August 9 revealing that it intends to launch its trial CBDC initiative in Australia. According to the RBA, it has entered into a partnership with the Digital Finance Cooperative Research Center (DFCRC) with the purpose of investigating CBDC utilization for a period of one year.

In addition, the collaboration intends to investigate and identify the most effective use cases and implementation approaches for the introduction of digital money in the nation.

The World Economic Forum (WEF) mentioned in its report that the European Central Bank (ECB) considers CBDC to be a trustworthy and protected kind of digital money issued by the government. In addition, according to the ECB’s projections for the currency, all of the European countries will successfully launch their individual currencies at the appropriate moment.

In addition, the World Economic Forum has reaffirmed that CBDC is a risk-free asset in comparison to privately created digital tokens because it does not come with volatility. As a direct consequence of this, organizations now have the option of storing their CBDCs in their bank or in their mobile app for use in retail transactions.

According to the WEF, CBDCs are the ideal complement to physical fiat cash, which users can show in order to make payments more quickly.

WEF on the Advantages of CBDC

During the forum, it was revealed that the purpose of the concept of the CBDC is to facilitate transactions, to hold assets, and to prevent loss. Most significantly, it will speed up the process of financial inclusion by providing services to people who do not have bank accounts.

Many more people will have easier and more expedient access to financial services as a result of this. CBDC can assist increase the resilience of financial institutions by serving as an alternative to the use of physical currency in the event that there is a shortage of cash on hand.

The World Economic Forum (WEF) mentioned that the use of CBDC would be a powerful instrument for determining the efficacy of employing DLT to combat financial crimes. CBDCs will contribute to an improvement in the implementation of “knowing your customer” (KYC) and will promote cash flow transparency.

Other central banks are also actively working on their own versions of the currency, in addition to the RBA’s efforts to implement CBDC as a new financial regulation.

Since cryptocurrencies began to gain popularity, governments all over the world have been hard at work developing CBDC and distributed ledger technologies in order to make it easier for people to make payments.

The core area of interest for CBDC is retail CBDC for payment for goods and services and wholesale CBDC for large businesses.

Meanwhile, the WEF works with central banks to design and implement CBDC and DLT adoption policies in their jurisdictions. The forum emphasizes utilizing the ledger technology by researching inputs from all sectors. In addition, it also aims to ascertain the risks that come with the implementation of innovative technologies like CBDC.

However, amid the positive benefits of CBDC, it has some inherent risks to the broader financial sector. Experts believe that it has the potential to disrupt the stability of a country’s economy. The increased use of CBDCs will reduce the use of banks. 

This will also decrease the number of bank deposits since individuals could opt for CBDC to store their funds.

The benefits and uncertainties are worth considering, and future deliberation will likely determine the outcome.

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