Will WEF’s Framework be Profitable for Central Banks?

The World Economic Forum (WEF) has created, in cooperation with some of the world’s major central banks, a central bank digital currency (CBDC) policymaker toolkit, shedding light on merits and demerits of such a move.

A number of central banker revealed that implementing CBDC will meet the increasing demand for faster and cheap cross-border payments, reduce settlement and counterparty risks, as well as improving cost and speed of interbank payments.

On the other hand, considering a CBDC may not add value to interbank payments domestically where an efficient monetary system is already present.

It is worth noting that, implementation of digital currency requires a huge amount of investments inflows in cybersecurity and system resilience, as the toolkit explain:

“Generates substantial financial risks, including: 1) bank disintermediation risk, which could reduce bank profits and lending activity; 2) digital‐bank‐run risk as depositors may rapidly convert commercial bank deposits to CBDC.”

It is worth mentioning that, the new framework classifies CBDCs into three categories: retail, wholesale and hybrid. Retail category allows non-financial users to hold digital currency accounts, while the wholesale one is an electronic system allowing access to the central bank reserve that will be used for interbank and security transactions by commercial banks and other financial institutions.

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Abdulhay Mahmoud 414 Articles
Abdulhay Mahmoud is a creative writer with over 15 years of experience in journalism, translation, and investor relations. He has B.A in English and Literature from a reputable University. He recently became a contributor at Cryptolydian.com to fulfill his thirst in reporting digital coins and blockchain-related news, an interest was built over the years.