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EBAday 2024: Challenges and benefits of CBDCs

EBAday 2024: Challenges and benefits of CBDCs

What is the future of CBDCs in Europe and what do experts expect from stablecoin adoption? These questions were answered at EBAday 2024 in Lisbon where leaders in digital currencies examined what the future holds for digital assets.

In the panel session ‘Challenges and benefits of CBDCs, tokenised deposits, and stablecoin adoption’, speakers David Cunningham, head of strategy and partnerships for digital assets, treasury, and trade solutions at Citi; Manuel Klein, market management payments and digital currencies, cash management at Deutsche Bank; Alessandro Roveda, head of network services solutions at Nexi Group; Gilbert Verdian, founder and CEO of Quant; and Phoebe Zhou, head of emerging payments, GPS Europe at HSBC, discussed how various countries manage public and private money.

Cunningham started off the session by explaining Citi’s approach to CBDC initiatives: “These industry issues are important for us to figure out; how we get our standards together takes time. It's important to get those things right much like David Birch said earlier. We don't need details on CBDCs tomorrow, but we need to get it right. What we are concerned with at Citi is that as we regulate for CBDCs, stablecoins, and other things, what will be the effect on commercial earnings and on our business model?”

Klein said that Deutsche Bank has been looking into blockchain capabilities and is highly involved in the Digital Euro project that has entered another phase in its development. He continued that there is a heavy focus on new developments with blockchain technologies, and creating transactions with more programmability.

Verdian stated that Quant works across central bank issuing retail CBDC, and issuing tokenised deposits and making all forms of money interoperable. Mentioning a project that they worked on, Project Rosalind, he highlighted that the main takeaway was programmability.

“It came down to programmability. Running payments electronically can do two things: the push and pull. But all of a sudden, if you have programmability embedded inside money for the first time, you can automate counterparty risk, embed multiple processes, enable locks and actions, and digital intelligence can encode data over time.”

Zhou highlighted several projects that HSBC has been working on, including Project mBridge, that connected markets to develop a wholesale CBDC, and Project Ensemble that worked on a centralised ledger system.

On what is needed to adapt technology moving forward, Klein said there has not been much beyond centralisation, but they are starting to see conglomerates of banks using sharing networks. He referred to Project mBridge as a good example of initiatives going in the right direction.

Klein stated: “What we currently see in the market with regards to blockchain usage within banks is basically making merchants manage accounts and to process payments potentially more efficiently. We are now starting to see conglomerates of banks forming networks which could then be used, for example, for cross border payments.”

Cunningham said that they need to move from experiments to reality. He emphasised that there have been many fruitful experiments and tests, and now incumbents are becoming stagnant, so it is time to get things done.

Zhou added to Cunningham’s point, saying that there are frameworks and pockets of innovation in various countries worldwide, such as Ireland and Hong Kong, that are taking action and moving forward with CBDC technologies.

Verdian concluded that to tackle CBDCs, banks need to innovate and enhance their internal infrastructure so that the CBDCs are proactive and can meet demand.

Roveda pointed out that fragmentation is key issue that needs solving. He added: “Within business organisation communications, on the other side of the ledger, especially in a use case, we see other markets and so we need to understand better how the technology operates in front of the problem we have; so that’s a blockchain reality.”

Concluding the panel, Zhou spoke on how HSBC collaborates with internet giants and companies across multiple jurisdictions to build up their blockchain capabilities, and in doing so are able to confront obstacles as they arise and see the value in connection.

“We are learning from banks, from fintechs, and from each other to think outside the box. But we also need to think down to eartch on how we can operate and justify the cost.”

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