Two weeks ago, the nChain team were in Istanbul attending the annual CBDC Conference. Central banks from around the world, and innovative companies gathered to give updates on their views on the technology and to learn more about the latest developments in the space. Many insightful discussions were had, and the Central Bank Digital Currency landscape is looking more promising than ever. Let’s dive into some of the key themes and highlights of the conference, and what the future might hold for CBDC technology.
The hot topics
One obstacle to adoption which was discussed widely was the issue of custody. Much like tokenised assets, CBDCs have the potential to be stored in a variety of ways – each with their own advantages and drawbacks. Under an account-based model the process can be more user-friendly, but it can be costly to setup and has the potential to go against the Web3 principle of self-sovereignty. A wallet-based approach on the other hand is easier to establish, can enterprises and central banks may need to spend time and resources on dispute resolutions. In addition, a wallet-based approach can run the risk of excluding less tech-savvy individuals from CBDCs. nChain’s Director of Strategy, Simit Naik, touched on this during his panel discussion with the Central Bank of the Bahamas, Thailand, and other delegates.
Another theme at the forefront of the conference was the issue of trust. Delegated from the IMF (International Monetary Fund) said that polling suggests the main reason individuals choose to remain unbanked is because of a lack of trust. As a result, this will be a key barrier to adoption that enterprises and banks will need to innovate and collaborate to overcome. Related to the issue of trust, was the other widely discussed topic of financial inclusion. Delegates from the Central Bank of Chile, The Bahamas, and elsewhere agreed that CBDC solutions will only thrive if implemented so that they are accessible to all. They also gave their own insights on the technology and the progress of their adoption.
In addition to these themes, another was discussed which had not received much attention at previous CBDC conferences. Central banks were keen to engage with the concept of digital identity (DID), and the ways the concept relates to CBDCs through custody and data ownership. Our Chief Information Officer, Christine Leong, discussed this topic as part of her presentation at the conference.
Central bank updates
The Central Bank of Nigeria, one of the few central banks to have implemented a live CBDC, gave valuable insights on what they would do differently if they were able to launch the project again. As part of their retrospective analysis, they emphasised the importance of education – not only for a country’s citizens, but also for a country’s retail banks and financial services. This is especially the case when implemented wholesale CBDCs, where the currency is distributed directly from a nation’s central bank. Without this, portions of the population can be excluded from such technologies.
Delegates from the Bank of England also gave an update on their CBDC program. At this stage, the central bank of the UK is taking a cautious approach – conducting more research before moving towards a pilot model. One bank which had initiated a CBDC pilot however was the National Bank of Kazakhstan, which gave an update on its results. The pilot is seeking to address questions relating to whether CBDCs would introduce new market opportunities and reduce the need for intermediaries. Perhaps more importantly was their goal to protect the anonymity of citizens and to prevent unnecessary censorship – a contentious issue which was widely discussed during the conference. Delegates from Kazakhstan said the testing of its CBDC was due to continue.
The road ahead
In summary, CBDC Conference Istanbul was a promising gathering of thought leaders and industry experts in the space. There are still various obstacles for overcome, but measurable progress has been made towards the widespread adoption of this revolutionary technology. The need for this kind of instrument is gathering momentum, and nChain’s time at the conference produced numerous insightful conversations and productive collaborations. We’re excited to be building in this cutting-edge sector and look forward to the developments and breakthroughs that lie ahead.
To find out more about nChain’s approach to CBDCs and CBDC solutions, click here.