CBDCs and the shift to data-centric transactions

Central banks around the world continue to progress trials of central bank digital currency (CBDC) prototypes. A range of use cases are being explored, including corporate bond settlements, tokenised foreign exchange settlements, tax lodgement and consumer transactions.

Many central banks are testing the feasibility of interoperable digital money platforms that use multi-entity distributed ledgers. Such ledgers create insightful data that will enable central bankers to conduct transaction monitoring, with a host of benefits including increased AML capacity and improved monitoring of consumer spending patterns and economic activity. Robust measures will be required to protect privacy and prevent data breaches.

While the focus of many observers has been on the role of central banks in this journey, little attention is being paid to the participants on ledgers who, depending on authorisations, are likely to have access to richer, more timely data sets on transactions. This will provide extensive scope for improved customer knowledge and service settings in many commercial relationships.

As digitisation continues to accelerate across the broader economy, the imminent roll out of CBDCs represents another milestone in the evolving usage of data and the maturation of the role of encryption, digital ledgers and tokens.

Despite rigorous regulatory oversight, recent bank collapses demonstrate the inherent opacity associated with traditional financial institutions.

The emerging digital environment offers the potential for greater transparency and confidence around core elements of the contemporary economic infrastructure.

Data is rapidly evolving from being a by-product of business activities to being a central component of how goods are services are produced, stored and exchanged. CBDCs will accelerate this transition. The benefits associated with a greater understanding of data’s value and commercial potential continue to accrue and provide compelling competitive advantages to those who seize the opportunity to maximise the potential of their data.