World Economic Forum (WEF) Creates First Policy-Maker Toolkit For CBDC Deployment
The World Economic Forum (WEF) has created, in partnership with some of the most important central banks, a policymaker toolkit for a central bank digital currency (CBDC).
The announcement was made on January 22. WEF is attempting to give a hand to policymakers when it comes to understanding what deploying a CBDC involves. Veerathai Santiprabhob, Bank of Thailand’s Governor said the toolkit is going to be very useful for the development of his institution’s CBDC, which is called Project Inthanon and is currently implemented. These were his exact words:
“From our experience, we need to identify tradeoffs between benefits from the use cases and their associated risks across different dimensions. This is where the Policymaker Toolkit could usefully provide an actionable framework for CBDC deployment.”
Rasheed M. Al Maraj, the Central Bank of Bahrain’s Governor said the toolkit is a great opportunity to learn more about how to adapt to the “Fourth Industrial Revolution”.
A CBDC Would Increase the Speed and Efficiency of International Interbank Payments
The framework of the toolkit recognizes that a CBDC, and not only that, could increase the speed and efficiency of international interbank payments, while reducing costs, also the counterparty and settlement risks. WEF says it can furthermore enhance reporting and transmission of financial data, not to mention that it can simplify traceability. The announcement says that before implementing a CBDC, solutions to economic friction should be found, whereas investments in system resilience and cybersecurity should be made.
Different CBDCs Distinguished by the Toolkit
The framework released by WEF has CBDCs classified as wholesale, retail and hybrid. Wholesale CBDCs are granting access to commercial banks and financial institutions to the central bank reserve for security and interbank transactions. Retail CBDCs are for non-financial users who want to hold accounts in the digital currency, whereas the hybrid ones give financial institutions access to central banks’ deposit facilities for holding reserves, which would increase security and interoperability between payment systems. WEF also explains that if a DLT-based CBDC would be discussed, the central bank would have complete control of its issuance.