DAVOS, Switzerland — When the world’s leading bankers and policymakers gathered this week at the 50th annual meeting of the World Economic Forum in Davos, their interest in blockchain technology was resoundingly clear.
Representatives from some nations are watching the People’s Bank of China's (PBoC) central bank digital currency (CBDC) experiment with eager anticipation. Neha Narula, director of MIT's Digital Currency Initiative, described the dozens of central bank experiments with digital assets in 2020 as “inevitable.” Along those lines, the WEF published a Central Bank Digital Currency Policy-Maker Toolkit Wednesday to help those projects access global standards if they choose.
“The Bank of Thailand has made good progress on a wholesale CBDC project, called Project Inthanon,” Veerathai Santiprabhob, governor of Bank of Thailand, said in a press statement. “From our experience, we need to identify tradeoffs between benefits from the use cases and their associated risks across different dimensions.”
In turn, Jiachen said Chinese technologists are drawing inspiration from the Facebook-initiated Libra project and ethereum, although she declined to say what types of initiatives are inspired by the latter.
“Can we join a consortium of countries who would like to use a regional digital currency where the PBoC is part of it?” she said in an interview. “There’s a lot of strategic thinking around whether that’s a real option.”
Most experts at Davos appear to agree blockchain technology should be used for more data collection, not self-sovereign finance.
For example, Ibrahima Guimba-Saidou, technology advisor to the president of Niger, said it will be crucial for emerging economies to use digital reporting systems to avoid embezzlement and other financial crimes.
“My goal is to have a paperless government by 2028,” he said on the sidelines of the WEF. “How could any leader or government official take that money without being noticed? Cryptocurrency brings that; through the blockchain you know where things are.”
As with China, Guimba-Saidou said his country is curious about the idea of a regional token.
It may be too soon to say whether bitcoin will be used by African nations, he added, but 15 nations in the Economic Community of West African States (ECOWAS) are in talks about launching a pan-African currency comparable to the euro.
Matthew Blake, the WEF’s monetary systems lead, said a digital, regional currency in Africa makes a lot of sense, although the euro has proved that cooperative currency governance is tricky at best.
While he expressed interest in watching how bitcoin evolves, Blake was skeptical, at best, of nation-states using bitcoin or allowing enterprises to use bitcoin on a significant scale. Mikail Jabbarov, economic minister of the Azerbaijan Republic, likewise told CoinDesk he struggled to imagine nation-states condoning the use of a decentralized currency.
While he didn’t suggest it should be banned outright, Jabbarov’s primary concern was collecting know-your-customer (KYC) information associated with bitcoin ownership. He was otherwise dismissive of the cryptocurrency’s potential for use cases beyond speculation and illicit activities.
At least, in Guimba-Saidou’s case, the focus is on monitoring public servants’ monetary transactions rather than all civilians. Along those lines, to safeguard who can access civilian monetary records and even passive surveillance of broader patterns, the PBoC recently filed a patent for a blockchain-based system for authorizing access to data.
“We’re going to have a public key infrastructure,” Niger’s Guimba-Saidou said. “That’s how I think we can have the transparency and traceability in place and the accountability that comes from it. All those things have to be done with independent organizations because otherwise one organization could try to grab the information or alter it.”
There’s widespread concern about bitcoin wallets that essentially allow “secret bank accounts,” according to Daria Kaleniuk, co-founder of Ukraine’s Anti-Corruption Action Center.
In an interview, she said Russia isn’t the only nation with a state-owned nuclear power plant that is also supporting bitcoin mining operations. This trend is also spreading to Ukraine and Moldova, she said, with Ukrainian oligarchs taking dominant roles in the local bitcoin market.
“When we see a politician declaring bitcoin, we consider him ‘high risk,’” Kaleniuk said. “This money can buy propaganda campaigns. … There needs to be unique identities of natural persons in this data.”
Some of these central bank projects go beyond mere identity checks. In China, there are already efforts to use government data, everything from healthcare data to telecommunications records, to shape financial services offered by the private sector.
“The government owns a lot of data,” Jiachen said. “They want to enable the private sector to be able to use them but they don’t want to hand over the data ownership. So we help the government in supporting their data-sharing initiatives.”
Most raw data isn’t recorded on the blockchain, she said. Instead, blockchain technology is used to prove the records were verified or calculated at the source, without sharing the original source. Jiachen said she hopes there will be strict policies that regulate who can request and access such data. MIT’s Nerula mirrored this concern.
“I hope privacy is a central concern and that it’s implemented with the Application Program Interface [API] in mind,” Nerula said.
Even private investors from a variety of countries, who asked not to be named, were curious about central bank experiments but wary of self-custodied assets.
Those who are optimistic about digital assets in Davos see them as a way to improve governance rather than reduce reliance on it.
“It’s easier to track the whole monetary flows and then you can make better monetary policies,” Jiachen said. “Now with a blockchain-based system, you will have a better feedback loop.”
She said many blockchain efforts, beyond the PBoC currency yet also adjacent to it, are targeting cross-border trade.
Meanwhile, economist and ethereum community guru Glen Weyl is busy taking meetings with politicians from emerging economies. He said he’s not a fan of China’s Communist approach but he hopes China’s collective and civic mentality can be leveraged to help pioneer value systems beyond traditional assets.
“Eventually we need to have less money and have forms of value that are more socially contextualized, like weighted edges on a graph that represent favors owed,” Weyl said in an interview. “China has social credit, so in some ways they are much more attuned to the social aspect" of money.
In order to avoid dystopian consequences, Weyl is working with organizations like the World Bank to develop the Data Freedom Act, which asserts data collectors have a “fiduciary responsibility and democratic responsibility” to both protect it and not flagrantly use data without consent. The document is based on providing a framework for “collective bargaining,” Weyl said, to give civilians more power to challenge problematic situations than they would have as individuals.
Speaking more broadly about CBDC experiments, WEF executive committee member Blake said the organization wants to "lean in" and "be active" there.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.