The future of central bank digital currencies

The annual OMFIF Digital Money Institute (DMI) Symposium reconvened in London over 10th – 11th May, bringing together a diverse mix of policy-makers, regulators, and private sector participants. GFT’s Global Head of DLT, David Creer, participated in a panel discussion entitled ‘How can blockchain revolutionise payments’, showcasing the importance of initiatives such as the Universal Digital Payments Network (UDPN) which GFT is involved with as a founding member.

In this article, we provide an overview of the key takeaways and discussions from the 2023 DMI Symposium, as well as share insights into how these trends and developments are shaping the future of digital finance. 

The conference focused on the latest developments in digital finance, with special attention given to retail and wholesale central bank digital currencies (CBDCs), tokenised assets, cross-border payments, and interoperability. Over the course of the two-day event, more than 40 expert speakers shared their insights on the harmonisation of regulatory frameworks, security concerns, and the future role of money. 

CBDC use cases 

When it comes to central bank digital currencies, it is fundamental to highlight the difference between retail and wholesale use cases: 

  • Retail CBDCs are digital currencies designed for general public use in everyday transactions, acting as a digital alternative to cash. They provide benefits such as increased financial inclusion, programmability, and reduced transaction costs.
  • Wholesale CBDCs are intended for financial institutions to facilitate interbank and large-value transactions within a closed network. They aim to improve efficiency and security in the financial system. 

Key takeaways from the DMI Symposium

1. Retail CBDCs: design, implications, and coexistence with tokens and stablecoins

Retail CBDCs are envisioned to complement and preserve the role of cash in the financial ecosystem. Banks will continue to act as intermediaries, ensuring a balance between traditional financial services and digital currency advancements. 

The coexistence of CBDCs with regulated tokens and stablecoins is anticipated, as they can offer complementary services to CBDCs in the digital landscape. Central banks will maintain issuance and oversight, ensuring that these digital assets align with regulatory requirements and do not pose systemic risks. To mitigate potential risks, the design of CBDCs, tokens and stablecoins should address concerns such as: money laundering, cyberattacks and interoperability between CBDCs, fiat money, and other means of payment. Those and other use cases which GFT has been working on can be found on the official Universal Digital Payments Network (UDPN) website. 

This collaborative approach will help promote a stable and secure digital currency environment whilst preserving the essential functions of banks and traditional financial systems. More on what CBDCs mean for commercial banks can be found in a recent article by GFT global DLT lead David Creer. 

2. Asset tokenisation and wholesale CBDCs in capital markets

Asset tokenisation and wholesale CBDCs have the potential to transform capital markets by increasing efficiency, transparency and accessibility. Tokenisation of assets allows for greater liquidity and the potential to unbundle financial services, enabling innovative use cases such as settlements on the same ledger. Wholesale CBDCs can act as a settlement asset, enabling smoother integration with existing systems.  

With advancements in technology and the increasing adoption of DLT, the lines between retail and wholesale CBDCs are becoming blurred, allowing for enhanced programmability and composability.  

However, whilst distributed ledger technology may not be essential for retail payments, it is crucial for operations that require programmability, such as asset tokenisation. You can discover more about GFT’s experience and views on DLT and blockchain here.  

These developments are fostering an environment for increased financial inclusion, cross-border transactions, and the integration of public and private money, paving the way for a more interconnected global financial ecosystem.  

3. Regulatory changes 

Regulatory changes in the digital currency landscape are essential for managing risks and promoting innovation. The expected approval of initiatives such as the Markets in Cryptoassets (MiCA) regulation in the EU serves as an example of how such changes can affect token issuance and establish a framework for crypto-assets and their service providers. Enhanced know your customer (KYC) and anti-money laundering (AML) measures, a focus on operational resilience, and risk management are all vital components of a well-regulated digital currency ecosystem. 

The importance of regulatory control 

  • Adapting existing laws and regulations to allow central banks to issue and govern CBDCs effectively 
  • Adjusting laws to enable CBDCs to be integrated into existing regulatory frameworks 
  • Ensuring consumer protection and privacy, whilst preventing misuse 
  • Ensuring CBDCs are designed with compliance to legislative norms, whilst preserving the role of cash and ensuring full interoperability 

These regulatory changes highlight the importance of the international convergence of regulation and supervision as a prerequisite for a secure and stable digital currency environment. A strong global regulatory framework is crucial to reduce risk and increase the stability of the financial system, where CBDCs will definitely have a role to play. 


Find out more about how GFT can help you get ready for CBDCs and other digital assets here 


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