The panel discussed the advent of digital currencies and its implications for the future of cross-border payments. Discussants focused on the benefits and challenges associated with the central bank digital currency (CBDC), the importance of global policy coordination, and the role of the private sector.
Key Points:
- CBDCs tradeoffs. With many central banks investigating possibility of issuing CBDCs, the panelists stressed that careful consideration should be given to CBDCs’ costs and benefits. Powell noted the U.S. Federal Reserve takes a cautious approach and has not yet decided on introducing CBDCs. He stressed that besides benefits, there are also some difficult policy and operational questions that need to be thoroughly evaluated, including cyber-attacks as well as the impact on monetary policy and financial stability. Carstens echoed the importance to “go slow,” noting that careful design could help avoid threats to the international monetary system due to fragmentation or adverse spillovers. Alkholifey noted that CBDCs could help enhance the resilience and efficiency of cross-border payments, and that Saudi Arabia has launched a pilot project with the United Arab Emirates to explore how modern technologies could help improve cross-border payments.
- Policy coordination. Although issuing CBDCs is a national decision, the discussants highlighted the importance of global policy collaboration on this cutting-edge topic. Powell emphasized that collaboration with other central banks on CBDCs is vital. Carstens argued that a huge challenge for CBDCs is to ensure efficient cross-border operation, which necessitates international coordination along technological, legal, and other dimensions.
- Private sector role. Given that the Libra project enlivened the CBDC discussions, the panelists also shed light on the role of the private sector. Nor Shamsiah stressed the contribution of the private sector in fostering innovation and providing value-added solutions to customers. Powell pointed to the need to work collaboratively with the private sector. He noted that the U.S. Federal Reserve is engaging with industry, research, and other stakeholders to advance the Fed’s work on digital currencies and cross-border payments.
Quotes:
“We have a chance to improve cross-border payments with huge benefits, especially for many of the world’s poorest people. And there is a pressing need to do so." Kristalina Georgieva
“It's more important for the United States to get it right than to be the first. Getting it right means we not only look at the potential benefits of CBDCs, but also the potential risks, and also recognize the important tradeoffs that have to be thought through carefully.” Jerome Powell
Contributor: Danny Xufeng Jiang
