During Davos the World Economic Forum announced that in past six months have been a wake-up call for some central bank policy-makers. Central bank digital currency (CBDC) has risen to prominence as a potential solution to multiple challenges such as financial inclusion and payment‑system efficiency. But due in part to the market-moving nature of central bank announcements, the majority of research and experimentation is done independently, behind closed doors.
For the first time, the World Economic Forum gathered insights from central bank researchers, global policy‑makers, international organizations and experts from over 40 institutions to create the CBDC Policy‑Maker Toolkit. Blockchain and academic experts from around the world also contributed to the design and content to help policy‑makers within central banks confidently evaluate whether CBDC is the right fit for their economy and guide them through the evaluation, design and deployment process.
“Given the critical roles central banks play in the global economy, any central bank digital currency implementation, including potentially with blockchain technology, will have a profound impact domestically and internationally,” said Sheila Warren, Head of Blockchain and Distributed Ledger Technology at the World Economic Forum. “It is imperative that central banks proceed cautiously, with a rigorous analysis of the opportunities and challenges posed.”
“We worked with almost a dozen central banks as well as prominent economists and financial industry leaders to create a common approach for evaluating and designing CBDC around the world,” said Ashley Lannquist, Project Lead, at the World Economic Forum. “The toolkit is the first of its kind to provide a concise summary of the key issues for policy-makers considering general-purpose or wholesale CBDC.”
The CBDC Policy‑Maker Toolkit provides high‑level guidance and information for retail, wholesale, cross‑border and private-sector issued “hybrid CBDC” as well as for large, small, emerging and developed countries. It guides users through the CBDC evaluation process, with descriptions for each stage of the process. Worksheets and information guides with research references accompany and correspond to each section. These documents serve as process checks and references to the decision‑making process. It also evaluates the role of distributed ledger technology within CBDC implementation and highlights important governance, user-data privacy, financial inclusion and security issues.
“We will pilot the new toolkit developed by the World Economic Forum, said Mr. al Maraj, Governor, Central Bank of Bahrain. “We hope that it will be an opportunity to learn, grow and to adapt to the changes in the Fourth Industrial Revolution.”
“The toolkit can serve as a springboard as central banks progress with their CBDC investigation and development,” Warren said. “The intricacies of implementing CBDC are complex and the implications are wide‑reaching. As a result, policy‑makers may find themselves in uncharted waters when attempting to evaluate the potential benefits and trade‑offs.”
While cases like Cambodia, Uruguay, Eastern Caribbean Central Bank and the People’s Bank of China show that some countries are accelerating, many others are still researching and have not decided whether or how to issue. The toolkit provides a guide for these countries to make progress quickly and analyse if CBDC is right for them.