Banking News

WEF forms governance consortium for digital currencies

WEF World Economic Forum Davos

Last week at its annual meeting, the World Economic Forum (WEF) announced a digital currencies consortium focused on governance. The Global Consortium for Digital Currency Governance will work with regulators to devise policies for a more robust financial system.

Digital currencies and stablecoins are regarded as a tool for enabling financial inclusion. However, to fully realize their potential, proper governance must be developed in the current fragmented regulatory system. To this end, the WEF is trying to bring together companies, financial institutions, government representatives, technical experts, academics, international organizations, NGOs, and members of the Forum’s communities.

“Digital currency, a cross-cutting topic that requires input across sectors, functions, and geographies, is a key area of interest for the Forum,” said Klaus Schwab, Founder and Executive Chairman of the World Economic Forum.

Other organizations such as the Bank for International Settlements (BIS) are also exploring digital currencies or crypto-assets as well as Central Bank Digital Currencies. However, the BIS is for central bankers as opposed to the WEF’s cross-sector initiative.

The consortium is a public-private initiative that will work on developing guiding principles for anyone who wishes to explore digital currencies. The goal is to build an efficient, fast, inter-operable, inclusive, and transparent financial system by collaborating with regulators across the world.

“We are exploring the potential that properly-regulated digital currencies hold for cheaper and faster cross-border payments, financial inclusion, and rooting out illicit finance,” said Tharman Shanmugaratnam, Senior Minister, Singapore and Chairman of Monetary Authority of Singapore (MAS).

While the WEF initiated this consortium, it also launched a central bank digital currency (CBDC) framework called the CBDC Policy‑Maker Toolkit. It will help central banks in exploring CBDC opportunities and guide them through the evaluation, design and deployment process.

“Governance is the core pillar of any form of digital currency,” said Mark Carney, Governor of the Bank of England. “It is critical that any framework on digital currencies ensures security, efficiency and legitimacy of payments while ensuring fair and open competition.”

The profile of digital currencies elevated after Facebook’s announcement of its Libra stablecoin. At the WEF Annual Meet, Forum, Libra head David Marcus provided some insights on the working of the proposed stablecoin.

Meanwhile, countries such as Hong Kong, Thailand, Australia, Switzerland, India, Japan, and China, among several others, are exploring CBDCs. China is probably the closest to launching a CBDC and is currently running pilots for the same.