The World Economic Forum (WEF) has released the results of a study on central bank digital currencies (CBDC), with one of the key conclusions relating to the risks of foreign access to a nation’s CBDC. The whitepaper released is one of many that fall under the WEF’s Digital Currency Governance Consortium (DCGC) white paper series.
Like other reports and statements in the past, the WEF believes that there are macroeconomic risks associated with cross-border CBDCs. It states that,
“significant foreign access to a country’s CBDC could result in serious unintended consequences to both the home country and foreign countries.”
Specifically, it lists currency appreciation/depreciation and exchange rate volatility, cybersecurity, high operation and overhead costs, tax avoidance, and currency substitution as some of the risks with these assets. As for stablecoins, which is not the main focus of this particular whitepaper, it also sees them as posing issues for emerging economies.
However, it does not suggest that CBDCs be dismissed outright, but that governments and regulators need to identify and develop policies and tools to curb any spillover impacts and risks. With more CBDC announcements being made, this will only become more apparent.
The DCGC is a global, multi-sector set of more than 85 leading organizations that have come together to design research and policy frameworks for the private sector and policy-makers. Their focus will largely be on CBDCs and stablecoins, both of which they state have risks and opportunities.
International cooperation and strong oversight key themes in paper
There are two major themes that the WEF whitepaper seems to focus on: global coordination that includes the private sector and strong oversight of the stablecoin and CBDC field. The WEF has not been known to be too crypto-friendly in the past, but it accepts that it is a growing part of the global economy.
Stablecoins, which regulators the world over are already showing concern over, pose more immediate risks, according to the WEF. The report even ends on a slightly optimistic note for CBDCs, saying that it could provide opportunities for economies. However, it remains firm that there are many risks that must be tackled.
In any case, it appears that governments are heading in the direction that the WEF is pointing to. Stablecoins have been on the radar of the U.S. government, and regulation seems imminent. Most major economies are now also working on a CBDC, while the cryptocurrency market itself entrenches itself further in the retail market.