Key takeaways on digital currency from The Davos Agenda

(Credit: Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Kathryn White, Project Fellow, Centre for the Fourth Industrial Revolution, World Economic Forum & Ashley Lannquist, Project Lead, Blockchain and Distributed Ledger Technology, World Economic Forum & Ashlin Perumall, Project Fellow, Centre for the Fourth Industrial Revolution, World Economic Forum LLC & Yan Xiao, Project Lead, Digital Trade, World Economic Forum


  • Digital currencies are poised to have an impact on the financial system; about 86% of central banks are exploring the benefits and drawbacks of central bank digital currency.
  • Leaders in blockchain came together at The Davos Agenda to discuss the required levels of regulation and prerequisites for financial inclusion.
  • Design, governance and provision of sufficient liquidity are among the key principles that are important to get right.

Last week was big for digital currencies with the Davos Agenda taking place and, separately, the release of the third BIS survey on central bank digital currency (CBDC).

Digital currencies, whether these are central-bank issued, price-stabilized cryptocurrencies (“stablecoins”), or non-stabilized cryptocurrencies such as bitcoin, are poised to have an impact on the financial system. In recent months we have seen new heights in bitcoin prices to $30,000-$40,000 per bitcoin, which has led to tremendous media coverage and growth in retail and, according to some sources, institutional interest and investment.

More information on cryptocurrencies can be found on CoinList.

However, despite very high interest in central banks globally, it is important to note that in almost all cases, the research and experimentation is exploratory and does not signify that the central bank that is carrying out the research or experiment has yet decided to issue a CBDC. There are also significant regulatory proposals and guidance coming out of the US government (such as those from the SEC, CFTC, OCC and FinCEN) and Europe (including France, Germany and the European Commission’s Markets in Crypto – Assets Regulation). Unfolding right before us is a potentially momentous worldwide transformation of digital money and its use.

The Davos Agenda featured two key sessions about Resetting Digital Currencies with members of the Forum’s Digital Currency Governance Consortium (DCGC) Steering Committee and global leaders in this space including President and Chief Executive Officer of the Western Union Company, Hikmet Ersek; Governor of the Bank of England, Andrew Bailey; Her Majesty Queen Máxima of the Netherlands; Chairman of North Island, Glenn H. Hutchins; Senior Minister, Government of Singapore, H.E. Tharman Shanmugaratnam; Chief Executive of the Overseas Development Institute, Dr Sara Pantuliano, and Chairman of the National Institute of Financial Research at Tsinghua University, People’s Republic of China, Dr Zhu Min.

During panel discussions (Session 1, Session 2), key conversations arose on global readiness to adopt digital currencies, the extent to which regulation should support innovation and some prerequisites for financial inclusion.

Responding with his vision of where CBDCs and other forms of digital currency fit in the current financial system, Governor Bailey sees the answer as nuanced. He acknowledged that immense innovation in digital payment mechanisms had taken place in recent years but cautioned that there were still considerable gaps to fill to reduce the cost of cross-border payments.

Regarding digital currency, Governor Bailey said, “no, we have not landed on the design governance and arrangements for a lasting digital currency. Cryptocurrencies as originally formulated are not it because people need assurance that their payments are made in something with stable value.” Acknowledging lessons from history, Her Majesty Queen Máxima summarized three key design principles that are important to get right:

1. A design of the currency that makes it stable and flexible.

2. A governance regime that instills trust in the currency

3. The provision of sufficient liquidity and some sort of stable backing.

Among those key governance challenges is the question of regulation and the potential competition between CBDC and privately issued digital currencies. According to Senior Minister Tharman, when regarding this innovative landscape, the intention is not to stop “the race.” The private sector players have been a source of fresh ideas and solutions, but they cannot be left on their own.

The payment system is a public good, and therefore needs to be regulated, interoperable and safe. Further, it needs to have the necessary transparency to avoid the risk of money laundering and illicit finance. Additionally, international players must collaborate with each other and international regulators to lay down the fundamental principles for such regulation.

Finally, important discussions were held on the prerequisites to financial inclusion as a focus area. Pantuliano outlined three critical prerequisites for making digital inclusion transformative for financial inclusion:

1. Access to the internet: in many low- and middle-income countries, and in rural parts of developed economies, internet communication infrastructure is very low. Even in the urban areas where at least the 3G network is about 90%, one needs to be cautious that this doesn’t exacerbate inequalities and digital exclusion. Countries that are seriously considering CBDCs need to ensure that there is sufficient internet and network infrastructure.

2. Digital adoption: about 3.8 billion adults in the world have access to a smartphone out of 8 billion. While this is predicted to increase, 100% accessibility is still far off. Before governments implement CBDCs, they will need to work with mobile providers to increase the rate of smartphone penetration.

3. Digital and financial literacy: it will be critical for people to understand, safely use, and trust the technology underlying CBDCs. CBDCs have the potential to benefit citizens and financial systems, however, they need to be designed with the end-users in mind, and especially those who are financially excluded.

These topics are core to the work of the World Economic Forum’s DCGC, which was first announced at the 2020 Annual Meeting and launched last spring. The DCGC is the first global multi-sector initiative for digital currency, a working group of 80+ member organizations from the public sector, private sector, civil society and academia, focused on creating a governance framework for digital currencies, including CBDCs and stablecoins.

It is anchored around a collective vision for the responsible and risk-aware development, deployment and adoption of new forms of digital currencies in both developed and emerging economies, and it reflects the Forum’s global multi-stakeholder model.

Last week during the Davos Agenda, the DCGC published a report that details the DCGC’s vision for the work to come in 2021.

Focus areas for central bank digital currencies.
Focus areas for central bank digital currencies. Image: World Economic Forum

We invite the Forum community and the public to accompany the DCGC as we tackle some of the most important policy and governance challenges to digital currency. Based on these key governance issues, what are your predictions for the roll-out and adoption of digital currencies globally?

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Cities: a ’cause of and solution to’ climate change

MEPs cap prices of calls within EU and approve emergency alert system

UN chief hopes for new agreement after Israel concludes international observation mission

How to stay in shape and step up support for refugees

Innovation is the key to the pay-TV industry’s long-term growth

‘Dangerous nationalism’ seriously threatens efforts to tackle statelessness: UNHCR chief

Is Eurozone heading towards a long stagnation?

Spain will soon overtake Japan in life expectancy rankings. Here’s why

Sovereign wealth funds could increase equality in a post-COVID world

Election-related violence claims 85 lives in Afghanistan: UN report

Countries must make teaching profession more financially and intellectually attractive

An economist explains what happens if there’s another financial crisis

Commissioner sings “Volar-e” but the European driver no “Cantar-e”

COP21 Breaking News_03 December: Transport Industry Drive for Improved Energy Efficiency and Electro-Mobility to Stem High Growth of Emissions

This fascinating map shows how food moves around the US

Draghi left alone with no hope of boosting EU growth as Merkel just focuses on next elections

These 11 companies are leading the way to a circular economy

From social entrepreneurship to systems entrepreneurship: how to create lasting change

Parliament votes for €1 billion in aid to Ukraine

How can education empower youth to become tomorrow’s leaders

Worth going ‘extra mile’ for a new Syrian constitution, UN envoy urges

TTIP is not dead as of yet, the 15th round of negotiations in New York shouts

250+ senior claims leaders under one roof, exchanging transformation strategy

The importance and the need of mobile technology in the health care system and in saving lives

MEPs share concerns about COVID-19 variants

Here’s how we can make innovation more inclusive

ECB settles the bank resolution issue, makes banking union tangible

Davos on Climate Change: citizens demanding more actions while CEOs tried to balance profit with sustainability

Coronavirus: Commission expands talks to a fifth vaccine manufacturer

A 3-step plan for carbon-neutral cars

COVID-19 Update: Solidarity and Joint Efforts Shall be the Main Theme For China and Europe in the Fight Against the Outbreak

2018 Golden Pen of Freedom Awarded to Maria Ressa of the Philippines

Trump badly cornered at home by agribusiness and steel consumer lobbies: Trade

As conflicts become more complex, ‘mediation is no longer an option; it is a necessity’, UN chief tells Security Council

European Youth Forum on Summit on Jobs and Growth

The European reaction to the neo-fascist wind

Venezuelan exodus to Ecuador reaches record levels: UN refugee agency steps up aid

MEPs debate Brexit and relations with China following EU spring summit

Brexit may finally not really happen; The Brits have second thoughts

COVID-19: lessons from Italy on public-private healthcare procurement

Mental health and social isolation: how do have an active participation in self-care?

Climate change and health: creating global awareness and using earth resources wisely

How cocoa farming can help stop deforestation

5 ways the ocean can contribute to a green post-COVID recovery

Trying to cure bank cancer with analgesics

How Islamic finance can build resilience to climate change

COVID-19: Why we must take the widescreen view of workforce uncertainty

Want a more inclusive society? Start with mobility

Mental Health: Role of the individual for their well-being in the pandemic

EU confronts environmental threats as global leaders attempt to revive the global sentiment at NYC climate week

‘Free state aid’ for imprudent banks

We need natural solutions to fight ocean and climate risk

With field schools in Kenya, UN agriculture agency teaches techniques to combat drought

It’s time to switch to a four-day working week, say these two Davos experts

Why building consumer trust is the key to unlocking AI’s true potential

What paleoecology can teach us about fires in the Amazon

UN ‘regrets’ new US position on legality of Israeli settlements

In Yemen, Special Envoy sees UN role in preserving ‘essential’ aid pipeline at country’s major port

Eurozone bank rescues ‘a la carte’ until 2015 then only bail-ins

Peacekeeping chief honours Tanzanian troops in Zanzibar, a year on from deadly DR Congo attacks

More Stings?

Trackbacks

  1. […] This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum. Author: Kathryn White, Project Fellow, Centre for the Fourth … ( read original story …) […]

  2. […] Key takeaways on digital currency from The Davos Agenda  The European Sting “china digital currency when:7d” – Google News […]

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s