CBDC season could soon be coming, as Chinareadies for the launch of its digital yuan and other countries also race to complete white papers or even pilot programs. However, a new report has made note of some potential risks that CBDC service providers and central banks must address as early as possible.<\/p>\n
The International Securities Services Association released its Blue Print for CBDC in Post-Trade-Settlementreport. The report outlined some financial and regulatory risks that could pose a threat to an interoperable multi-CBDC system on a global scale.<\/p>\n
In terms of financial risk, the report pointed to possible issues such as fragmented liquidity, multiple levels of counter-party risk, and challenges with settling a net amount. Coming to regulatory concerns, these included how settlements would be finalized across borders, a difference in technological standards, and the matter of which laws would apply to which jurisdiction.<\/p>\n
The report also added,<\/p>\n
Costs and risks from a lack of timely interoperability between tokenised and non-tokenised systems also needs careful consideration, especially where transactions are moving via on-ramp\/off-ramp models between fiat and CBDC for instance.<\/p>\n
But these arent the only risks, as potential CBDC users have their own anxieties as well. For example, NSA whistleblower and privacy advocate Edward Snowden called CBDCs a danger. He also suggested that the state could use them to surveil and control its population.<\/p>\n
However, some believe the opposite. For example, theEuropean Central Bank has expressed its worry about foreign intermediaries handling European payments. At the same time, a survey of German respondents showed that out of the minority who supported CBDCs many also wanted to sidestep private payment stakeholders.<\/p>\n
As the Winter Olympics approach, the East Asian regime has reportedly introduced a variety of ways for both domestic and foreign visitors to make use of its CBDC. Whats more, foreign companies are said to be feeling the pressure as well.<\/p>\n
For its part, ISSAs report also warned of the dangers of early CBDC adopters leaving other countries behind. The report noted,<\/p>\n
This is especially true at the start of adoption where there will be a sunrise challenge: i.e., some systems will adopt the new features first while other systems in the same ecosystem\/value chain will lag, giving rise to the need for interoperability.<\/p>\n
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