Crypto and CBDC panel discussion at G20 ministers forum in Indonesia

The G20 ministers forum panel on CBDC and crypto hosted Australian and Swiss Central bank governors, the Head of Hong Kong Monetary Authority, IMF and BIS specialists.

The panellists admitted that the crypto industry already provides a full spectrum of services that exists in the traditional financial world and, unfortunately, exhibits all the risk factors and weaknesses of the latter. Stablecoins were named as a bridge between the conventional and DeFi markets.

The panel was moderated by Hyun Song Shin, economic adviser at BIS and he was particularly interested in the delegates opinions on regulations, stablecoins and CBDC.

Swiss National Bank governor Thomas Jordan talked positively about the promises of crypto technologies, despite of the flaws in the current crypto markets. Speaking about the importance of regulations, he said that classification of the digital assets should be the starting point. In this regard, he emphasized the importance of central banks and their unique capabilities to lead the process. Nevertheless, Swiss National Bank (SNB) is focusing on wholesale CBDC, currency that is available only to financial institutions that have direct access to Central bank reserve accounts, used in domestic and international interbank settlements. The preliminary results, according to the SNB governor, show that they are technically feasible and efficient. The challenges are in legal, governance and policy areas.

RBA’s Philip Lowe shared his observation from history regarding risks of private money in terms of instability and loss of confidence, but then highlighted the role of private entities in driving innovations such as digital tokens that replace physical cash:

I tend to think that the private solution is going to be better [than retail form of central bank digital currency] if we can get the regulatory arrangements right. That’s because the private sector, in the end, is going to be more innovative than the central bank; it’s going to be better at innovating and designing features for these tokens. And there are also likely to be very significant costs in the central bank setting up a digital token system. I think it’s going to be better for the private sector to manage those costs.

Among others, Eddie Yue the Chief Executive of the Hong Kong Monetary Authority presented, mBridge, a cross-border CBDC project they are implementing with BIS innovation hub.

The remarks from Tobias Adrian, the financial counsellor and director of the Monetary and Capital Markets Department of the IMF were mostly about the implications on financial stability and mitigating fragmentation in cross border settlements.

The panel discussion formats were rather informal and helped to reveal the true sentiments of speakers on much troubled crypto topics. In between the otherwise standard and empty words about regulations we heard some interesting thoughts that might show the way forward.

Full recording of the panel can be found at Royal Bank of Australia website.