SIBOS on CBDC, tokenization: fragmentation is normal at this stage of innovation – Ledger Insights
The proliferation of Central Bank Digital Currency (CBDC) solutions and the fragmentation in tokenized bond issuances may seem like a problem at first glance. However, Jennifer Lassiter, the leader of the Digital Dollar Project, argues that this fragmentation is a natural feature of innovation. Just like in the early days of the Internet, where different web browsers competed and standards were yet to be established, the fragmentation in CBDC and blockchain platforms represents the experimentation and pushing of boundaries in this emerging field.
Lassiter emphasizes that innovation goes through various stages, starting with academic research and experimentation before moving towards real-world implementation. As CBDCs evolve, standards for technical protocols, technical standards, and policy frameworks will gradually emerge. This evolution will require a flexible architecture that can accommodate the maturation of technologies and policies, ensuring that progress isn’t reset every few years.
Lee Braine from Barclays adds that as experimentation and innovation reach a certain point, consolidation is needed to achieve mass adoption and interoperability. At this stage, solutions for privacy and interoperability can be developed to enhance the adoption of CBDCs.
Looking to the future, the panelists predicted that wholesale CBDCs will dominate as settlement assets at the backend. However, in the customer-facing space, tokenized deposits or other forms of assets are expected to take over the retail-facing function. Interestingly, Sonja Davidovic, from the BIS Innovation Hub, expressed that there might not be a need for a retail CBDC from the perspective of the Monetary Authority of Singapore. These insights highlight the various perspectives and possibilities in the CBDC landscape.
In conclusion, the fragmentation in CBDC solutions and tokenized bond platforms should be seen as a natural part of the innovation process. As the industry matures, standards and interoperability solutions will emerge, leading to more consolidation and mass adoption. The future of CBDCs lies in the wholesale space as settlement assets, while retail-facing functions may be fulfilled by tokenized deposits or other asset forms. This ongoing innovation and evolution in the CBDC field ensure that progress continues and paves the way for a digital future for currencies and finance.
