The World Economic Forum published a central bank digital currency (CBDC) paper exploring “Global Interoperability Principles”. Interoperability is used in the broadest sense including working with existing payment systems as well as for cross border CBDC.
Much of the report focuses on regional motivations, highlighting common ground. For example, sub-Saharan African countries rank financial inclusion as the number one CBDC driver. But Africa does not consider programmability as a high priority feature, which contrasts with other emerging economies.
An internet analogy
The author explores two factors that drove the internet, packet switching and the TCP/IP communication protocol. For CBDC, it suggests communication protocols might use the ISO 20022 financial messaging standard.
Packet switching splits up messages into smaller packets for transfer efficiency and later reassembles internet packets on arrival. The WEF hopes to see something similar for CBDCs that it calls “token switching”.
“All transactions must be routed to their destination within a network, or across different networks by the network infrastructure simply by trying to find the most efficient path to the destination,” says the report.
The CBDC principles
Much of the paper explores regional activities based on WEF interviews and research from the BIS and IMF. The paper also acknowledges standard setting bodies such as the ITU’s Digital Currency Global Initiative.
More than 25 principles are outlined grouped into governance, legal, identity, payments and technology. For example, it says CBDC solutions should be technology agnostic and interoperate with DLT and non-DLT networks. And when it comes to DLT it should also support private, permissioned and public networks.
