The World Economic Forum, in collaboration with Accenture, released a detailed report on CBDCs titled “Modernizing Financial Markets with Wholesale Central Bank Digital Currency”. The report provides a thorough exploration of the global movement towards the adoption of Central Bank Digital Currencies (CBDCs) by the year 2030.
In addition, it highlights the initiatives of central banks around the world to launch 24 operational CBDCs, which are expected to significantly improve the security, efficiency and accessibility of financial markets.
The Impact of CBDCs on Global Financial Markets
In an era characterized by rapid technological innovation, central banks worldwide are making significant progress towards the adoption of Central Bank Digital Currencies. By 2030, 24 live CBDCs are projected to be operational, potentially transforming the landscape of global financial markets through improved security, efficiency and accessibility.
The integration of CBDCs into the financial ecosystem addresses both current and emerging challenges within the sector, including the need for safer and more efficient transaction mechanisms and the demand for broader financial inclusion. CBDCs are designed to modernize the capabilities of central bank money and improve access to central bank money, which is essential for promoting stable and efficient economic environments.
A primary motivation for the development of CBDCs is their potential to improve systemically important payment systems between financial institutions. These digital currencies are not just theoretical constructs, but are being piloted and tested in real scenarios across multiple continents.
Real Case Scenarios where CBDCs are already in practice
For example, in Switzerland, a live wCBDC (wholesale CBDC) was recently used to settle a digital bond transaction, marking an important milestone in the practical application of CBDCs in mainstream financial operations.
The ongoing projects also extend beyond single nation applications. In Asia and the Middle East, initiatives such as Project mBridge are redefining cross-border payments, expanding their acting members to include 25 central banks and institutions. This reflects a growing trend towards multilateral cooperation in the development and deployment of CBDCs, emphasizing their role in facilitating international trade and economic integration.
Additionally, the European Central Bank and other major financial entities are exploring the use of distributed ledger technology (DLT) for CBDCs to improve securities and foreign exchange transactions. These advances highlight the dual potential of CBDCs to innovate payment systems and strengthen financial stability across jurisdictions.
How will wholesale CBDCs address the current challenges?
Interestingly, most real-time gross settlement (RTGS) systems that facilitate cross-border bond settlement operate within limited hours. The Bank for International Settlements (BIS) notes that there is a maximum overlap during a five-hour window from 06:00 to 11:00 GMT.
However, to fully establish such a global settlement window, significant modifications to the operating hours of RTGS systems are required. Accenture suggested that a wholesale CBDC could complement RTGS systems by operating nearly 24 hours a day.
In addition, the industry faces a growing problem with settlement failures, especially as bond settlement periods decrease from T+2 to T+1. Implementing a shared distributed ledger technology (DLT) infrastructure as a unified source of truth can mitigate these failures. A wholesale CBDC can then serve as the settlement asset.
One of the highly touted benefits of DLT is the provision of atomic settlement in securities transactions, which removes counterparty risk. However, when traditional financial sectors started exploring DLT about six to seven years ago, they recognized a critical issue: atomic settlements require high liquidity at specific times during the day. This requirement contrasts with traditional systems that facilitate liquidity through mechanisms such as netting, queuing and netting.
Thus, it remains uncertain whether a wholesale CBDC can effectively address these liquidity risk challenges.
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