Central Bank Digital Currencies (CBDCs) are emerging as a significant development in global finance, with 94% of central banks exploring CBDCs, and the World Economic Forum projecting 24 CBDCs to be operational by 2030.
This paper finds that CBDCs are a crucial enabler of a tokenised financial ecosystem. Nevertheless, their adoption and success depend on coordinated industry efforts and a balanced evaluation of benefits versus costs.
As the global industry association for exchanges and clearing houses (CCPs), we represent the providers of over 250 market infrastructures that see more than $124tr in trading pass through them annually (at end-2024). By contributing our insights, we aim to ensure that the development and implementation of CBDCs align with the operational realities, efficiency needs, and stability requirements of public markets. This makes our perspective vital in shaping the future of CBDCs in a way that supports the broader financial ecosystem.
Key insights:
- CBDCs’ Benefits: CBDCs introduce a new form of central bank money, a useful step towards creating tokenised asset ecosystems, improving audit trails, and streamlining cross-border payments by bypassing traditional banking networks. CBDCs could offer efficiency gains in settlement, be useful as collateral, and provide a complementary or alternative payment rail that enhances resilience.
- Challenges and Risks: CBDC transaction speeds currently fall short of requirements for today’s low latency trading environment. Their value during low-activity hours raises cost-benefit questions. While CBDCs could reduce counterparty risk, existing systems like central clearing already address this with added efficiencies. Legal and regulatory updates would also be essential, particularly for cross-border use.
- Implementation Complexities: Interoperability with existing systems, costly integration with legacy infrastructure and regulatory hurdles are all issues. Cross-border coordination would also be crucial for CBDC success.
- Conclusion: CBDCs are necessary to enable digital ledger technology adoption in traditional financial markets. However, achieving widespread public market transformation may be limited due to high costs, technological demands, and extensive regulatory adaptation required. Its success is not guaranteed simply by its existence.
