At next week’s Hyperledger Global Forum in Phoenix, Sheila Warren, the World Economic Forum’s Head of Blockchain, Digital Currency and Data Policy will give a keynote. If you’d like to register for the event, readers can use this discount code for non-members: HGFLEDGER20.
Before joining the World Economic Forum (WEF), Harvard educated Sheila Warren was previously a Wall Street lawyer turned social entrepreneur. She set up a SaaS company that helps U.S. foundations make foreign grants. So Warren knows a bit about financial inclusion. When looking at digital currency initiatives, without mentioning any specific projects, she’s not convinced about the social benefits being claimed.
“If you were to go through and read some of the white papers that came out, they bleed financial inclusion,” said Warren.
She reeled through a list of people she’d expect to see involved, such as development economists, someone who does foreign aid and charitable funding, a person who specializes in remittances. “Where are these people in the conversation?” asked Warren.
As a self-described pragmatic optimist, she wants to do something about it. In 2018 the WEF released a paper called “Blockchain Beyond the Hype.” She intends to publish a similar one on digital currencies: “Financial inclusion, real or not.”
To deliver the goal of financial inclusion, Warren plans to engage the relevant groups and come up with a list of digital currency use cases. She gives examples of some countries in the world where a massive proportion of GDP is from remittances. “The problems that they’re talking about are totally different than the ones that some of these stablecoins are claiming that they’re going to solve,” said Warren.
This fits into the WEF’s sweet spot to curate important conversations and bring together groups. That’s also what Warren’s department has been doing with central banks.
Central Bank Digital Currencies
Warren joined the WEF in October 2017. “The meeting I had with central bank governors in 2018 in Davos and the one I had in 2020 was like night and day,” said Warren.
The WEF laid the groundwork for exploring central bank digital currencies (CBDC) by engaging with central banks at WEF meetings, conferences and via webinars. Instead of interacting with salespeople who push their own solutions, the central bankers had access to core technologists. So the Forum has been working with the community of 40 central banks for 18 months.
“There was a clear understanding from the level two, level three people at central banks that what we were doing was very important,” said Warren. “And I think the governors really got it when Libra hit the papers.”
Previously the Forum had engaged central banks from a monetary policy perspective but had never discussed technology. Warren believes the WEF has earned their trust because of its objectivity and neutrality as it has no skin in the game. As Warren put it: “If this whole space vanishes tomorrow, the Forum’s going to keep trucking along.”
As a result of the engagement, the central banks asked the WEF for help in analyzing whether or not a CBDC is appropriate. Warren commented that for most jurisdictions, it’s probably not the right thing at the moment.
At the 2020 Davos meetings, the Forum published a “Central Bank Digital Currency Policy-Maker Toolkit” to help in the decision making. The paper was the result of collaboration with central bankers, international organizations, academic researchers and financial institutions.
Meanwhile, Warren’s responsibilities cover digital currencies, blockchain and data policy. And she’s not a fan of viewing blockchain in isolation, as opposed to part of the technology stack. But blockchain has a role to play in two major themes at this year’s Davos meeting. They are Environmental, Social, and Governance (ESG) and Sustainable Development Goals (SDG).
Warren classified blockchain benefits into two categories. On the one hand, there are blockchain use cases that achieve efficiency gains, such as cross border supply chains. While she thinks these applications are perfectly valid, they represent the shareholder extraction model.
What she finds more interesting from a social impact perspective is the stakeholder model, where the initial producers can also benefit, such as smallholder farmers in the case of a food supply chain. This fits right in with the Forum’s theme of stakeholder capitalism. And she predicts the more meaningful transformation will happen in areas such as Africa, Central America, Indonesia, Malaysia, Vietnam and the Philippines.
At the same time, she predicts that the traditional “model of financial extraction” will be centered in Switzerland, the United States, U.K. and Canada.
“My hope is that we’re able to create through tokenization or economic or financial models where the citizens of those (other) countries are able to extract the value through the stakeholder capitalism model,” said Warren. “And it’s not just going to be the sort of neo-colonialist thing where the builders are from the global North.”
As an example of attempts to address this, a recent WEF blockchain project in Colombia made sure to transfer skills to the team on the ground to enable them to maintain and grow the project. That’s a different kind of inclusiveness.
“Our theory is if you’re not being inclusive of all the different communities, then there’s no point,” said Warren. “Blockchain is going to work when it’s an ecosystem that transforms. That is our fundamental premise.”