Exploring the Future of Money: Insights from the BIS Innovation Summit 2024

At the recent BIS Innovation Summit 2024 in Basel, we were honored to participate in discussions about digital finance and the future of money. Over the course of three days, we engaged in thought-provoking conversations with leading figures from major central banks, gaining valuable insights into the future Central Bank Digital Currencies (CBDCs).

One panel, moderated by BIS Economic Adviser Hyun Song Shin, featured Shaktikanta Das (Governor of the Reserve Bank of India), Joachim Nagel (President of Deutsche Bundesbank), and Fabio Panetta (Governor of the Bank of Italy). The discussion provided valuable insights into the current state of retail and wholesale CBDCs.

We’ve summarized the key insights and takeaways from the high-level discussion on the evolving role of CBDCs, the motivations behind their development, and the challenges ahead.

Whether you're a financial professional, a tech enthusiast, or simply curious about the future of money, this summary will provide you with valuable knowledge straight from the industry's top minds.

Panel Overview

• Occasion: BIS Innovation Summit 2024
• Topic: The Future of Retail and Wholesale Central Bank Digital Currencies (CBDCs)‍

Current State of CBDCs

To get the panel started, Hyun Song Shin emphasized the dual role of central banks as both guardians of stability and innovators. Central banks are central to the innovation in issuing the unit of account and ensuring trust in money.

• Key Quote: "Central banks have to be at the center of much of the innovation because they issue the unit of account and are ultimately there as the guardian of trust in money."

Fabio Panetta (Bank of Italy) then provided a broad perspective on CBDC developments and highlighted key observations from the CPMI survey.

• Key Observationssome text
  • Over 90% of central banks are exploring CBDCs, with motivations differing between retail and wholesale CBDCs.
  • Wholesale CBDCs are increasingly seen as more likely to be issued within the next six years compared to retail CBDCs.
  • Motivations include safeguarding central bank money’s role, promoting financial inclusion, and improving payment efficiency.
• Key Quotes
  • “Some Central Banks see CBDCs as a tool to safeguard the role of central bank money as the anchor of the monetary system—both at the wholesale and retail level.”
  • "The ultimate goal for a central bank issuing a CBDC is to provide additional opportunities for intermediaries to meet the demand for financial services that are efficient, safe, and affordable."

Shaktikanta Das (Reserve Bank of India) highlighted India’s digital public infrastructure and ongoing pilots in both retail and wholesale CBDCs.

• Key Takeaways
  • Motivations for CBDCs: To increase digitization of payments, ensure financial inclusion, and provide safer alternatives to private digital currencies.
  • Implementation: India’s phased approach began with wholesale pilots in November 2022 and retail pilots in December 2022.
  • Retail CBDC Pilot: Leveraged existing UPI infrastructure, achieving up to 1 million transactions per day, focusing on features like offline usage and programmability.
• Key Quote
  • "CBDC with its unique technology has a transformative potential... Despite impressive progress, there is still considerable scope for increasing the digitalization of payments."

Joachim Nagel (Deutsche Bundesbank) discussed the transformation agenda at the Bundesbank, emphasizing the need for central banks to adapt to a rapidly changing digital landscape.

• Key Points
  • The importance of embracing new technologies and changing traditional processes.
  • The potential for the digital Euro to be a highly innovative CBDC, complementary to cash.
• Key Quote
  • "The world outside is changing, it's becoming more digital, so the business model of the central bank is changing to a certain extent."

Following opening statements, Fabio Panetta and Joachim Nagel discussed the concept of unified ledgers and tokenization.

• Key Insights
  • Tokenization can improve efficiencies and reduce frictions in wholesale transactions.
  • The need for a robust legal framework to secure the link between tokens and underlying assets.
  • Potential benefits of tokenization in reducing intermediaries and enhancing settlement processes.

Exciting Transformations to Come

The panel provided comprehensive insights into the motivations, current state, and future directions of CBDC development. Key themes included the importance of interoperability, the potential of tokenization, and the need for central banks to adapt to technological advancements to maintain their relevance and effectiveness in the digital era.

You can check out the full video below.

In deployments around the globe, our CBDC Sandbox is making it easier than ever to stand up and iterate on central bank digital currencies.

If you’re interested in learning more about the tech stack that’s required to navigate the delicate balance between innovation and stability, schedule a talk with one of our solutions architects.