World Federation Of Exchanges Seeks Safeguards Against Digital Currency Risks
The World Federation of Exchanges (WFE) has warned that without a clear and coordinated framework for Central Bank Digital Currencies (CBDCs), financial markets could face significant setbacks, including legal uncertainty, market concentration, and cross-border inefficiencies.
In a newly published policy paper, seen by THE WHISTLER, the global trade association for exchanges and clearing houses outlined the critical role CBDCs play in supporting the growth of tokenisation—a process that allows fractional ownership of assets and broader market participation.
According to the WFE, CBDCs could serve as a reliable and secure form of digital settlement, offering the credit and liquidity safeguards associated with traditional central bank money, and eliminating the risks posed by commercial bank money or stablecoins.
The paper emphasizes that a successful CBDC ecosystem demands a coordinated effort from the broader financial industry, encompassing exchanges, banks, and asset managers.
Without such coordination, the WFE cautions, market participants may lack the confidence necessary to engage in widespread trading of tokenised assets such as stocks, bonds, and derivatives.
However, the implementation of CBDCs is not without challenges. The WFE identified three major areas of concern—investment, legislation, and cross-border settlement.
Upgrading legacy systems to support real-time settlement using CBDCs will require substantial financial and technological investment, which could prove burdensome for smaller firms and new market entrants. This, the WFE notes, risks increasing market consolidation and reducing competition.
The report noted that from a legal perspective, existing frameworks must evolve to accommodate CBDCs as legitimate settlement assets.
This includes ensuring CBDCs can facilitate final and irreversible settlements in the event of defaults, similar to how traditional money functions in capital markets today.
World Federation Of Exchanges Seeks Safeguards Against Digital Currency Risks is first published on The Whistler Newspaper
