We will explore the future of Central Bank Digital Currencies (CBDCs) and cryptocurrencies. We will discuss the potential relationship between CBDCs and cryptocurrencies, and the impact they may have on the financial landscape. This event is brought to you in partnership with Cello, our sponsor. We encourage your active participation by submitting questions via Slido to our speakers.
Richard D. Parsons, Senior Advisor at Providence Equity Partners LLC and a member of the Board of Directors at Cello, welcomes the participants to the discussion. He shares insights from his experience in the media industry, emphasizing the importance of being proactive in shaping technological transformations rather than reacting to them.
The conversation shifts to the key considerations in CBDC design. Privacy and enabling innovation are highlighted as critical factors. The challenge lies in striking a balance between protecting privacy and facilitating essential functions like monetary policy and economic power transmission. Design choices become crucial in determining the pros and cons of different CBDC architectures.
The discussion moves on to the level of global interest in CBDCs. Several central banks are taking the possibility of CBDCs seriously, with conversations held with dozens of them. The G20 has also addressed the challenges in cross-border payments, reflecting a broader interest in CBDCs and related initiatives. The adoption of CBDCs is seen as an opportunity to enhance cross-border payments and expand the reach of currencies.
Collaboration between central banks and the private sector is seen as essential in exploring CBDC design options. Projects like “Provo” by Stellar are introduced, which offer sandbox environments for central banks to experiment with CBDC development. Such initiatives aim to bridge the knowledge gap and facilitate the collaboration needed to address key questions surrounding CBDC implementation.
The importance of user adoption for CBDCs is highlighted, with a focus on the challenges faced by central banks in understanding digital user adoption. While central banks may lack expertise in this area, it is crucial to consider factors like privacy, safety, resilience, competition, efficiency, and monetary sovereignty. The risks associated with a lack of user adoption are discussed, emphasizing the need to explore this aspect further.
A comparison is made between the security of CBDCs and cryptocurrencies. CBDCs are officially backed and hold the status of legal tender, distinguishing them from cryptocurrencies. The system’s design and official backing give CBDCs a unique advantage in terms of security and stability.
The potential impact of CBDCs on the demand for cash is explored. It is noted that CBDCs could affect the use of cash, but their role extends beyond just a replacement for physical currency. CBDCs can contribute to the establishment and internationalization of currencies, as well as enhance their stability.
The event concludes with a closing conversation between Jim Cunha, Executive Vice President of Secure Payments and Fintech at the Federal Reserve Bank of Boston, and Stephen Ehrlich, Director of Research, Digital Assets at Forbes. They discuss the distribution channels for CBDCs, including banks and other intermediaries. The importance of building a well-integrated payment system and fostering private sector innovation is emphasized. Additionally, they touch on China’s early entrance into the CBDC space and the need for thorough development and implementation rather than rushing to be the first.
The future of CBDCs and cryptocurrencies is a complex and evolving topic. This tutorial provided a snapshot of the current discussions and considerations surrounding CBDCs and cryptocurrencies. The speakers highlighted the importance of striking a balance between privacy and functionality in CBDC design, as well as the need for collaboration between central banks and the private sector