Session
Regulation, competition and innovation: How could regulatory and self-regulatory frameworks help foster more competitive Internet-related markets, a larger diversity of business models, and more innovation? How to enable equitable access to data, marketplaces or infrastructures for fostering competition and innovation on the Internet?
Panel - Auditorium - 60 Min
The concept of digital money - a virtual equivalent of cash - has been under discussion for more than a decade. The difference between an electronic version of state currency and a physical one lies primarily in the closer relationship of consumers with the central bank - without the intermediation of commercial banks. In this session we would like to talk with our panellists and the esteemed audience on digital currencies representing an evolution of money movement and a growing potential to extend digital payments.
There are different forms of digital currencies: cryptocurrencies (non-sovereign digital currencies backed by on distributed ledger technology, e.g. Bitcoin), stablecoins (digital currencies backed by fiat held at commercial banks, e.g. US digital currency) and central bank digital currencies (CBDC - backed by the central bank). We are seeing an increasing interest in all of them from different parties - from banks across the world who are looking to utilize digital currencies in new payment flows and from consumers, looking for convenience and safety. 80 per cent of central banks report that they are engaging in works on central bank digital currencies . As money evolves, we think it's important for the whole financial market to evolve with it to ensure that payments involving new forms of money can be processed in a secure and convenient manner. In this session we would like to focus on the potential of digital currencies for the global economy. Why digital currency is a noteworthy, forward-looking project, that could benefit consumers, businesses and states? What kind of approach is taken by leading central banks all over the world and what are the results of their analyses? What steps shall be taken to shape CBDC framework? What risks and benefits are characteristic for the concept of digital currencies? Tiering, infrastructure, privacy, user features, monetary stability, regulatory regime as well as cross-border application are those areas that still need to be established in order to build resilient and widely used digital currencies system. Privacy for consumers and businesses is a vital property of any payment network. At the same time, we recognise there need to be safeguards and controls to protect against illicit use. Finding this balance requires deep collaboration between public and private sector. Further engagement of policy makers, regulators and global organisations like Internet Governance Forum are crucial to explore these issues. In this session together with our guests from Swedish Central Bank, European Commission and Polish Financial Supervision Authority we plan to present the current status of progress with developments on CBDCs in different countries, address the challenges for adequate regulation and invite the experts from other organisations to engage in the discussion. We see the IGF community as a group uniquely positioned to influence the evolution of this emerging issue of digital currencies.
During the session we plan to use Official Online Participation Platform – Zoom. Onsite moderator will be responsible for facilitating the discussion between panellists and audience onsite. The role of online moderator is to gather the questions and comments of online participants and forward them to the panellists. From 60 minutes of the session, the first 25 minutes will be focused on presenting the policy questions by moderator and presenting the views by panellists. The next 35 minutes will be the time when the audience will have the possibility to address policy questions, as well as panellists’ statements. During preparations to the session, the Organisers will proactively invite the stakeholders from different groups than represented by panellists to engage in the session, in order to ensure gathering as many different views as possible and to provide coherent report from the session, that could influence further works on digital currencies framework.
Visa
Konrad Slusarczyk, Private sector, Visa, Central-Eastern Europe Katarzyna Cyrbus, Private sector, Grayling, Central-Eastern Europe Piotr Sobolewski, Private sector, Polityka Insight, Central-Eastern Europe
Peder Østbye, Special Advisor in Financial Infrastructure Department, Norges Bank, Government, Western European Group
Peteris Zilgalvis, Head of Unit for Digital Innovation and Blockchain, European Commission, Intergovernmental Organisation, Western European Group
Catherine Gu, Senior Product Manager, Fintech Department, Visa, Private Sector, International Group
Marek Dietl, CEO of the Warsaw Stock Exchange, Government, Central - Eastern European Group
Piotr Sobolewski, [email protected]
Katarzyna Cyrbus, [email protected]
Konrad Slusarczyk, [email protected]
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Targets: Payment innovations can be a catalyst for the digital economy. Digital payment solutions help unlock economic growth, boost tax revenues, and reduce the size of the informal economy. As a critical source of empowerment for micro and small enterprises, women, and other underserved populations, digital payment solutions can help improve public services in line with citizen needs. Doing business rankings list paper/digital ratio in administration procedures as one of the factors of effectiveness of the processes, which has a direct impact on the easiness to start a business or registering property. Above all, they make the procedures reliable. Digital payment are often people’s first contact with other financial services. And they serve as an on ramp to the use of other digital products. Such products as digital disbursements can also be a catalyst for financial inclusion, helping to bring unbanked and underbanked populations into the financial services mainstream. Reloadable prepaid products can function like bank accounts for some unbanked and underbanked populations, providing a secure place to store, track, and load funds. Nearly 40 percent of the adult population worldwide, or approximately two billion people does not have access to a formal payment account. Digital payments already are a part of business projects aiming to close the wealth gaps among those underserved – e.g. First Boulevard is a community neobank focused on building generational wealth for the Black community, by enabling customers to purchase, custody, and trade cryptocurrencies and pay using debit cards. For governments digital payments may help increase tax revenues, higher use of digital payments in a country also generally correlates to a smaller informal economy. More than 65% of all measures currently implemented by governments to tackle the informal economy focus on digital payments, compared with only a third in 2007. A 20 percent increase in digital payments per year for five consecutive years can reduce the GDP impact of the informal economy by up to 21.8 percent.
Report
Digital currency is an evolving concept, complementing existing digital solutions enabling how people pay. The usage of blockchain is matured, competition from the private sector accelerates developments and pilots of CBDCs are already running. Emergence of new forms of payments is inevitable, and countries should act decisively to adapt to this digital change addressing specific needs of different stakeholders.
The need to innovate still remains, as new technologies may bring better solutions. Financial inclusion is a huge aspect of the conversation around CBDC, as this solution may help close the gap for the underbanked to digital infrastructure. CBDC can make cross-border transactions more effective and bring interoperability of digital currencies. Tailor made approach is required to embrace opportunities for the whole ecosystem.
Introducing digital currencies requires political decisions and changing the law. Politicians should be open to digital currencies concept and initiate the dialogue with central banks, commercial and technology partners on the features of digital currencies’ framework. They should encourage broad public discussion to develop digital currencies' system in a democratic way, guaranteeing privacy of its users, user-centric appoach and effective tools
Central banks, commercial banks, fintechs and other state and private institutions should experiment with different technical solutions to choose those most adequate for specific societies' goals. Existing international organisations could lead on the standardisation and interoperability aspect of CBDC and ensure equal dialogue and participation of different entities in creation of digital currencies ecosystem.
The concept of digital money - a virtual equivalent of cash - has been under discussion for more than a decade. In this session we talked with our panellists and the esteemed audience on digital currencies representing an evolution of money movement and a growing potential to extend digital payments.
During the discussion the participants focused on central bank digital currencies (CBDC - backed by the central bank), but also the differences between them and stablecoins (digital currencies backed by fiat money held at commercial banks, e.g. US digital currency) and cryptocurrencies (non-sovereign digital currencies backed by on distributed ledger technology, e.g. Bitcoin). Main conclusions of the conversation are as follows:
New forms of payments are inevitable, hence stakeholders should be open and flexible to testing new solutions
Catherine Gu, Global CBDC Lead at Visa introduced the discussion expressing that digital currency is an evolving concept, complementing existing digital solutions enabling how people pay. She stressed that the usage of blockchain is matured, competition from the private sector accelerates developments and pilots of CBDCs are already running. Hence, emergence of new forms of payments will be inevitable, and countries should act decisively to adapt to this digital change addressing specific needs of different stakeholders. The need to innovate still remains, as new technologies may bring better solutions. According to Visa discussions, financial inclusion is a huge aspect of the conversation around CBDC, as this solution may help close the gap for the underbanked to digital infrastructure. Marek Dietl, CEO of the Warsaw Stock Exchange, stated that capital markets are primary users of digital currencies and Polish capital market is the biggest in CEE region so digital currency is a natural source of interest for Warsaw Stock Exchange. He expressed the belief that CBDC has various benefits – it can make cross-border transactions more effective, may be used for social benefits or state aid and bring interoperability of digital currencies. Peder Østbye, Special Advisor in Financial Infrastructure Department at Norges Bank shared the experiences of Norwegian central bank pilot project on CBDC which started more than 5 years ago and was launched because of low cash usage in Norway and precautionary principles. Experimental testing is still ongoing and will last until June 2023, but initial results showed in which direction should Norwegian central bank go in order to meet the needs of Norwegian society. Østbye underlined that introduction of CBDC requires political will and legislative changes and that central banks should be open and flexible, as CBDC can enable cash substitution in some countries or improve monetary systems in others.
Transparency, user-centric approach and standardisation are key aspects to take care of by the decisionmakers
The discussion between participants of the session focused mainly on the issues of granting transparency, high user experience of CBDCs and standardisation. Common challenge noticed by participants of the discussion was how to ensure the mass adoption of CBDC. One of the conclusions was the idea of existing international organisations leading the standardisation aspect of digital currencies’ developments. There is a strong need for standardisation of CBDCs, as specific private provider wouldn’t benefit the whole ecosystem. Nevertheless, it was also emphasized that CBDC and stablecoins can exist parallelly.
Selected central banks already conduct pilot projects on digital currencies and their experience could be used by the others in order to develop the best framework for digital currencies.
Guaranteeing privacy for the users of digital currency was a noticed challenge by some of the participants of the discussion. It was concluded that this is an aspect that should be monitored by international organisations.
Participants of the discussion agreed that CBDC could use variety of tools and solutions, but political decisions should be made first in order to define specific goals for the country. Tailor made approach is required to embrace opportunities for the whole ecosystem and active dialogue between all stakeholders and a user-centric approach will be crucial to develop innovative and secure framework for CBDCs. Central banks, commercial banks, fintechs and other state and private institutions should experiment with different technical solutions to choose those most adequate for specific societies' goals. Politicians should be open to digital currencies concept and initiate the dialogue with central banks, commercial and technology partners on the features of digital currencies’ framework. They should encourage broad public discussion to develop digital currencies' system in a democratic way, guaranteeing privacy of its users, user-centric approach and effective tools.