Central banks around the world say digital currency regulation is slow. Central bank governors around the world have been looking into the possibility of a Central Bank digital currency.
According to experts, one of the most important enablers of the central bank’s digital currency is technology.
This was revealed during a panel discussion at the World Economic Forum in Davos, Switzerland, featuring central bank governors from South Africa, Peru, and Israel.
The World Economic Forum convened the Digital Currency Governance Consortium in 2020 and 2021. The consortium has two phases and is currently exploring the second phase. Phase one consisted of the forum publishing the White Paper Series Compendium report.
This phase is complete while phase two will examine the macroeconomic impacts of digital currencies and inform approaches for digital currency regulation. Central Bank of Israel is one of many banks exploring the possibility of digital currency. The bank has since built a central bank digital currency hub which has seen some advantages.
“It’s important to notice and emphasise that the transaction will be immediate as opposed to several days which is what’s happening in today’s system. One of the key insights and I’m getting into is that it is possible to make a direct and immediate cross-border payment between CBDC coins of different countries,” says Israel Central Bank governor, Amir Yaron.
Last year, South Africa also participated in research into the potential use of central bank digital currencies for cross-border payments.
While Phase Two is currently underway, governors from various countries agree that a discussion with policymakers about the transition to digital currency is necessary.
“The technology, there are enough people to solve the technology problem, the big issues are about public choice, there are about regulation and more importantly are about the governance arrangements that are going to be put,” says South African Reserve Bank governor, Lesetja Kganyago.
The forum says while technological development remains an important objective, the time has come for the public sector to play a more decisive role. As new payment methods appear, appropriate regulatory frameworks will be critical.
In the near term, the public sector will make critical decisions that will shape the trajectory of digital currency development, including regulatory decisions, improving the efficiency, resilience, and competitiveness of payment systems, and deciding whether to issue a central bank digital currency.
WEF 2023 | Regulation of digital currency discussed: