At Sibos 2023 in Toronto, EY’s Christopher Woolard led a session focused on the significant rise of digital currencies over recent years and questioned whether their impact will be temporary or lasting.
Woolard noted that while the cryptocurrency landscape has largely been shaped by private initiatives, the launch of Libra has drawn central banks into the conversation, raising questions about their role and acceptance. He emphasized that central banks are grappling with important public policy issues, such as privacy concerns and the implications for individuals who may be vulnerable or marginalized.
The panel discussion moved beyond the initial excitement surrounding digital currencies, exploring the variety of digital currencies currently in use and market participants’ visions for their future applications.
Ryan Rugg, head of digital assets at Citi’s TTS, initiated the dialogue by discussing the bank’s announcement related to Citi Token Services aimed at enhancing cash management and trade finance. According to Citi, this service leverages blockchain and smart contract technologies to provide digital asset solutions for institutional clients, integrating tokenized deposits and smart contracts into their global network.
Rugg elaborated on the benefits of tokenizing deposits, which offers persistent infrastructure and mentioned their current operations between the US and Singapore. He indicated a commitment to multi-bank and multi-border functionality, highlighting how programmability adds value to the digital asset ecosystem.
Scott Hendry, senior director at the Bank of Canada, shared insights from a central bank perspective on the developments in the digital asset realm. He urged consideration of the benefits and risks associated with different forms of money, emphasizing the importance of trust in the financial system.
Jack Fletcher, head of policy and government relations for digital currency at R3, noted two key debates surrounding the development of retail Central Bank Digital Currencies (CBDCs). He highlighted a global trend where cash usage is declining and posed questions about what would replace it, stressing the characteristics of cash that society might wish to retain, such as anonymity and ease of use.
Matthias Schmudde, from Deutsche Bundesbank, elaborated on the German digital Euro project, stating its aim is to adapt cash for the digital era. Both Hendry and Schmudde reiterated that real demand from the public is crucial for the adoption of CBDCs, ensuring that whatever is developed meets societal needs and justifies investment.
Schmudde concluded with an acknowledgment of the measured approach central banks must take, emphasizing the importance of dialogue and consensus to arrive at solutions beneficial to the entire financial ecosystem.