The Banking Executive Magazine - July Issue 2021

Central Bank Digital Currency has strongly shaken the banking and financial ecosystem. Digital curren- cies and payment instruments in- cluding cryptocurrencies, global stable-coins, and CBDC have emerged as important innovations with potentially large impacts on the international monetary and financial system. CBDC promises increased efficiency and lower costs, improved access to financial services, and greater trans- parency and accountability in pay- ment systems and financial flows. It also raises new risks and greater technical and regulatory complexity. CBDC are unlikely to overtake cryp- tocurrencies due to their limited sup- ply. CBDC may become a reality soon. It may help boost crypto adoption as people will have access to the plat- forms to convert cryptocurrencies into legal tenders. It will also help in accelerating financial inclusion. The way forward is to enhance CBDC regulation, design, and archi- tecture as follows: • Regulation: CBDCs will have far- reaching implications on the future of finance, including the buying and selling of digital assets and se- curities. However, this relies on the foundations of a dedicated legal framework to facilitate the trans- parency, distribution, and issuance of a digital form of money by global governments. As regulators and central banks take concrete steps in the direction of establish- ing CBDCs, the world will begin to embrace digital currencies as a standard. • Design: CBDC design elements de- pend on individual country prefer- ences. International cooperation on data frameworks, privacy pro- tections, and technical interoper- ability are necessary to fully realize the benefits of CBDC, especially for cross-border payments. Multi- lateral agreements and CDBC stan- dards will take time, but national authorities can act now to ensure an enabling domestic environment for CBDC and other digital cur- rency developments • Architecture: establishing the ar- chitecture, infrastructure, and rules for access to CBDC will entail de- sign choices that are not without trade-offs. Priorities for national au- thorities include establishing data frameworks as well as digital iden- tity. REFERENCES Wikipedia, Bank For International Settlements (BIS), Investopedia, At- lantic Council, CBDC Tracker, Bank of England, Board of governors of the federal reserve system, Financial Times, PwC, CSIS Center For Strate- gies and International Studies, Finex- tra, Arabian Business, Reuters, AI Multiple, Hedera, American Express, COLUMBIA LAW SCHOOL'S BLOG ON CORPORATIONS AND THE CAPITAL MARKETS. the BANKING EXECUTIVE 42 ISSUE 151 JULY 2021