FinTech LIVE: CBDC vs DeFi Discussion

Decentralised finance (DeFi) has long been touted as the payment method of the future, with predictions widespread saying a decentralised currency will be ubiquitous among consumer wallets as we move into a world of web3. 

Cryptocurrencies, of course, represent decentralised financial options for the now – while CBDC’s are a centralised form of digital currency that look set to be tied to state currencies/ central banks. 

So, what does the future hold for both? At FinTech LIVE, we speak to Odelia Torteman, Global Digital Finance, IFC, World Bank Group; Rupert Poland, Vice President – UK Financial Institutions, Digital Asset Lead, Marsh; and Pradeep Singh, Head of Fintech and DeFi, Capgemini, who give us their take. 

CBDC vs DeFi

Singh delves into a point of differentiation between CBDCs and crypto. “If you’re holding digital money in a wallet or website, there is an equal link deposit to a government site. This means you are governed, you are centralised,” says Singh.

“This is where CBDCs are different from cryptocurrencies. The similarity is that both are built on blockchain, and there are joint core values of blockchain.

“These are to figure out a way for a faster, cheaper, better financial system.”

Torteman adds: “CBDCs emerged as a result of three main trends. First, the uptick in digitalisation across financial services; second, a lot of monetary authorities are trying to address some of the challenges we currently have; third, many of the challenges we’re seeing are related to private, DeFi currencies and stablecoins.

“This is driving the need for centralised currencies; CBDCs.”

For Poland, the biggest opportunity for CBDC use is in peer-to-peer or peer-to-business payment systems.  He notes: “Cryptocurrency has done an excellent job in enabling instant settlement without the need for intermediaries – driving efficiences.

“The issues with crypto are in its volatility and lack of trust. As CBDCs are government-backed, they can come in and fill that void.”

For more from our three panelists, you can watch the video above. 

And, to watch any of our other speakers from Fintech LIVE New York, and our interviews from Money20/20 Europe, click the link HERE.  

You can also look at our upcoming events, FinTech LIVE London and InsurTech LIVE, coming your way in November and October respectively.