Exploring the future of CBDCs: insights from Money20/20

Money20/20 hosted a panel discussion titled “CBDCs: The Next Steps,” featuring industry experts Claire Conby, operations and governance lead at the Digital Pound Foundation; Susan Friedman, senior director of global policy at Ripple; and Teana Baker Taylor, vice president of policy and regulatory strategy at Circle Internet Financial.

The panelists delved into the complexities surrounding central bank digital currencies (CBDCs), including privacy concerns, programmability, and the potential for efficiency and reduced errors with programmable payments.

CBDCs, digital forms of fiat money issued by a country’s central bank, have been a topic of intense discussion and debate in recent years. The panelists highlighted the privacy concerns that arise from the bundling of data with transactions in CBDCs.

The programmability of these digital currencies, which allows for automated transactions based on predefined rules, has also raised concerns about potential infringements on human rights.

The panelists emphasized the need to distinguish between programmable money and programmable payments. While programmable payments can offer efficiency and reduce errors, programmable money could potentially infringe on human rights by making decisions for individuals about how they spend their money.

The panelists also discussed the potential for stablecoins, a type of cryptocurrency designed to maintain a stable value relative to a specific asset or a pool of assets, to become a regulated digital settlement asset in Europe and the U.K. by July 2024. Companies such as MoneyGram, Visa, and Mastercard are already using stablecoins for transactions and payments.

The discussion also touched on the need for regulation to ensure that different forms of digital money are appropriately regulated and the risks are understood. The panelists mentioned MiCA, a regulatory framework for digital assets in Europe, which establishes categories to help consumers make informed choices about the type of money they use.

Ripple, a digital payment protocol that enables fast, direct transfers between parties, has been working with smaller countries to develop CBDCs to solve specific problems. However, the panelists noted that there is a need to educate consumers about blockchain, stablecoins, and CBDCs, as there is a lack of awareness of cryptocurrencies and digital assets.

The panelists also raised concerns around the implementation of CBDCs and the need to promote financial literacy and accessibility for all users. They predicted that stablecoins are likely to be a choice for consumers and that there will be regulation with MiCA characteristics to provide guardrails for consumers using digital assets.

The development of CBDCs requires a significant amount of analysis to address policy questions such as privacy and interoperability, according to a podcast featuring NatWest’s Simon Johnson. He noted that concerns around financial literacy and digital inclusion must also be addressed, as new forms of digital money require access to smartphones and may not be available for offline payments.