WEF Summit: Digital Currencies are Empowering

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In Brief
  • The World Economic Forum held the session, Digital Payments: Realizing the Vision, during its Global Technology Governance Summit on April 7.

  • Irene Arias and Long Chen discussed digital payment examples in Latin American and China.

  • Regulatory requirements to facilitate digital payments were brought up by Himino Ryozo and Demetrios Marantis.

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The World Economic Forum (WEF) held its Global Technology Governance Summit this week. On April 7, Arjun Kharpal, China Technology Correspondent at CNBC, moderated the session, Digital Payments: Realizing the Vision.

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Panelist Irene Arias, Chief Executive Officer at IDB Lab, discussed digital currencies and blockchain utilization in Latin America. Professor Long Chen, Director at Luohan Academy, spoke of his experience with digital payments in China.

Meanwhile, Himino Ryozo, the Commissioner at Japan’s Financial Services Agency, and Demetrios Marantis, Senior Vice-President and Global Head of Government Engagement at Visa, bought up the regulatory requirements to facilitate digital payments.

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Empowerment From Digital Currencies

However damaging it has been, ironically, the global coronavirus pandemic has empowered millions of Latin Americans. According to Arias, 14 out of 26 countries in Latin America provided digital payment transfers to their citizens.

Consequently, 15 million people in Brazil and another 5 million in Chile got bank accounts for the first time in their lives, Arias said. She emphasized that this must lead to a more inclusive financial model. She stressed:

“We don’t want to transfer inequalities of the physical world into the digital world.”

The IDB Lab CEO later related how her organization has focused on creating a common good. She highlighted utilizing the Lac-Chain blockchain platform as a free common protocol that others could build use cases on.

Arias related that her lab collaborated with the WEF concerning customs and digital wallets, “giving people a chance to build their own economic passport.” She also said the World Bank and the African Development Bank already use this model.

Digital commerce in China

Professor Long also mentioned examples of digital currencies in China that could be exported. He started by contextualizing digital commerce in his experience with Alipay. The e-commerce platform has hundreds of millions of consumers, with tens of millions of SMEs to serve them. While they used to be limited geographically, they can now serve customers globally. The average distance between a buyer and a seller in China is 1,000 km.

These e-commerce platforms facilitate digital payment projects in several ways. One example Professor Long gave was his work with a bank that served over 20 SMEs. He emphasized that half of these SMEs were led by women. These SMEs received capital using the 3-1-0 model, “three minutes to apply, one second to get funding, zero interference.”

Another example Professor Long highlighted in his work with Alipay was “Ant Forest.” By leading a green lifestyle, such as taking public transportation, users earned “green energy.” They could use this “green energy” to make transactions with other users or even plant a tree. In total, 550 million people have used Ant Forest, which planted 220 million trees, and reduced 12 million tonnes of carbon.

Regulatory facilitation 

Finally, panelists also brought up that governments need to provide appropriate legislation to facilitate digital currency development. Commissioner Himino said Japan introduced 3 categories for non-bank payments service providers. Each level has regulatory requirements that are proportionate to risk.

He also mentioned that Japan is now at the proof-of-concept stage for its central bank digital currency (CBDC). Japan has also established a new agency to coordinate the digital transformation of society. 

Additionally, Marantis stressed that governments should focus on removing barriers to cross-border e-commerce. He lamented our current “era of economic nationalism,” manifested in data localization policies. Marantis emphasized:

“It’s super harmful to the ability of small businesses, which are the backbone of every single nation’s national economy, to be able to start, run, grow, and thrive.”

Citing pervasive regulatory fragmentation, he said, “the more [national governments] can coordinate data policies, the better.”

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Nick is a data scientist who teaches economics and communication in Budapest, Hungary, where he received a BA in Political Science and Economics and an MSc in Business Analytics from CEU. He has been writing about cryptocurrency and blockchain technology since 2018, and is intrigued by its potential economic and political usage. He can best be described as an optimistic center-left skeptic.

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