Evolution of CBDCs: Insights from UST’s Daniel Field
As the use of blockchain technology in financial services continues its expansion, the buzz around Central Bank Digital Currencies (CBDCs) – and the scope of their use – has continued to grow.
Here, we speak to Daniel Field, Director of Innovation and Global Head of Blockchain at UST, on the evolving landscape of CBDCs in 2024.
From proof of concept to proof of values
While there is some variation in the advancements of CBDCs from country to country, for Daniel, it’s clear that the CBDC landscape is growing rapidly. The Bank of International Settlements has predicted there will even be 15 retail CBDCs by 2030.
“We’ve already moved from proof of concepts and experimentation piecemeal on different aspects into proof of values and designing prototypes of full systems,” he says.
“In other words, many central banks are now working on the real thing. In parallel, we see more political and legislative work being done, setting the groundwork for future implementations.”
In March 2024, global bank messaging network SWIFT announced its plans to launch a CBDC platform in the next two years, connecting rapidly growing, yet otherwise independent CBDCs.
What’s more, 2024 has already seen several large tenders from the European Central Bank – not on CBDCs specifically, but on different parts of the system vital for CBDC functionality.
Daniel continues: “A total of five tenders went out to competition ranging from mobile apps and Software Development Kits (SDKs) to security aspects.
“The sector is poised to continue this trajectory for some time but there are still many who are hesitant on the value equation – not on the theoretical benefits, but rather more the detailed risk-reward and cost-benefit in practice.”
CBDCs: Benefits outweigh the risks
While some are hesitant about the value equation, Daniel reminds us that risk-reward and cost-benefit are complex analyses.
“There is more to transformation than new capabilities,” he says. “For sure CBDCs do proffer those: for example, in UST’s work with the Bank of England we showed how smart contracts could easily enable innovations, such as smart three-party locks that place agreed parameters on when a payment should be made.
“Yet transformation encompasses not only what we can do but how we do it: efficiency, timeliness, ease of use and more.
“In Project Rosalind (an experiment in API prototypes for CBDCs from the Bank of England and Bank of International Settlements on which UST collaborated), we also showed that making these complex functions available and with a low learning curve through standard APIs allowed users, in this case, both established banks and startups, to deliver the sort of services that today require large and complex technology and legal systems.”
It’s clear that initiatives like Project Rosalind, which lower the barriers to CBDC transformation and reduce costs, are what will deliver the most evolutionary impact on the sector, granting individual teams the ability to innovate at speed.
