New GFMA paper from BCG and Clifford Chance outlines benefits and challenges of wholesale central bank digital currencies


The paper encourages collaboration between public and private institutions and outlines opportunities, challenges and issues related to the design, issuance, legal status and use cases of wCBDCs

BOSTON, February 22, 2022 /PRNewswire/ — Over 70% of central banks have started exploring the possibility of launching central bank digital currencies (CBDCs). A new paper commissioned by the Global Financial Markets Association (GFMA) from Boston Consulting Group (BCG) and Clifford Chance LLP identifies GFMA’s critical considerations on the success of potential CBDCs in wholesale markets (wCBDCs).

Justified Central Bank Digital Currencies: A Global Capital Markets PerspectiveThe paper is based on research and in-depth interviews conducted in Q4 2021 with contributing member firms and market participants with specific expertise relevant to CBDCs.

The authors’ recommendations emphasize that:

  • Central banks, in collaboration with the private sector, should continue to explore the role that wCBDCs can play in promoting innovation and efficiency in wholesale markets.

  • Central banks should take a measured approach to wCBDC adoption and the timing should be prudent to mitigate any potential transition risks affecting safety and soundness and financial stability.

  • wCBDCs are expected to work alongside, not replace, older instruments and systems. Therefore, it is important that wCBDCs are interoperable with the broader financial market ecosystem.

  • The use of sandboxes, proof of concept, dialogue with market participants and pilot programs based on specific use cases will test the application of wCBDCs and help identify the impact on capital markets.

  • After sufficient analysis of the lessons learned, financial institutions and regulators should determine a transition period that reflects the risks and opportunities and effective implementation.

The paper outlines the opportunities, challenges, and issues related to the design, issuance, and legal status of wCBDCs, while presenting use cases to provide a framework for continuing a constructive conversation.

The GFMA, which represents the leading global financial and capital markets participants, is particularly interested in this topic as its members will play a crucial role in the potential dissemination and brokerage of CBDCs. Alison’s parentsExecutive Director, GFMA said: “Banks recognize that the adoption of wCBDCs could improve the efficiency, resilience and effectiveness of cash flows and capital markets, but for a wCBDC to be a valuable tool it must be part of a collaborative public-private sector partnership . In this document, we outline a number of critical design and legal factors that must be considered.”

“wCBDCs are designed to facilitate wholesale market transactions, with direct access to wCBDCs restricted to regulated financial institutions and PSPs. We and our partners recommend following the current two-tier structure that puts central banks at the foundation of the payments system when allocating end-user-centric activities to financial institutions and other PSPs,” he said Roy ChoudhuryManaging Directors & Partners, BCG.

Simon Gleesonpartner, Clifford Chancesaid: “The first rule of medicine is ‘do no harm’ and we must follow this tenet as we work to transplant wCBDCs into the real world economy. If the legal status of wCBDCs is not properly established, it could pose a threat to the security and integrity of markets, as well as to privacy rights. The legal status of wCBDCs would need to be firmly established, guaranteeing that wCBDCs are fungible with fiat currencies before they become widely available.”

A copy of the report can be downloaded here.

For media inquiries:

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About the Boston Consulting Group
The Boston Consulting Group works with business and community leaders to address their most pressing challenges and capitalize on their greatest opportunities. BCG pioneered business strategy when it was founded in 1963. Today, we work closely with clients to pursue a transformative approach that aims to benefit everyone involved – empowering businesses to thrive, build sustainable competitive advantage and create positive societal impact.

Our diverse, global teams bring deep industry and functional knowledge and a range of perspectives that challenge the status quo and inspire change. BCG provides solutions through leading management consulting, technology and design, entrepreneurial and digital ventures. We operate in a unique collaborative model across the business and at all levels of the client organization, driven by the goal of helping our clients thrive and enabling them to make the world a better place.

About GFMA
The GFMA represents the common interests of the world’s leading financial and capital markets participants to provide a collective voice on matters that support global capital markets. It also advocates policies to manage risks that know no borders, regional market developments that impact global capital markets, and policies that encourage efficient cross-border capital flows to end-users. GFMA efficiently brings savers and borrowers together, benefiting from broader global economic growth. The Financial Markets Association Europe (AFME) is located in London, Brusselsand Frankfurt; the Asia Securities Industry & Financial Markets Association (ASIFMA) in Hong Kong; and the Securities Industry and Financial Markets Association (SIFMA) in new York and Washington are respectively the European, Asian and North American members of the GFMA.

About Clifford Chance LLP
Clifford Chance is one of the world’s leading law firms with significant depth and breadth of resources across five continents. As a single, fully integrated, global partnership, we pride ourselves on our approachable, collegial and team-based way of working. We always strive to exceed the expectations of our customers, which include companies from every trade and industry sector, governments, regulators, trade associations and non-profit organizations. We provide them with the highest quality advice and legal insights that combine the firm’s global standards with in-depth local expertise.


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SOURCE Boston Consulting Group (BCG)


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