WEF – Modernizing Financial Markets with Wholesale Central Bank Digital

The report explores the potential of wholesale central bank digital currencies (wCBDC) to address challenges in financial markets globally. Central bank money (CeBM) is important for interbank payments and securities transactions due to its lack of credit and liquidity risk, settlement finality, and promotion of financial stability. wCBDCs could unlock new economic models and integration points, preserving the role of CeBM as a credit risk-free payment instrument in the digital era. wCBDC systems are seen as well-positioned to modernize cross-border transactions involved in FX or securities. However, persistent challenges like liquidity management, accessibility, compliance, and system interoperability need further investigation to determine the effectiveness of wCBDCs. The report also discusses the modernization of real-time gross settlement systems and legacy infrastructure alongside wCBDC implementation. It compares wCBDCs with privately issued digital currencies to envision a diverse digital payments ecosystem. Policy-makers, financial market infrastructures, and private sector leaders are urged to consider these insights for a more efficient, responsible, and secure financial future.