Rapid technological change and the continuous emergence of new players and new public and private digital currencies have transformed the global landscape of financial industry. As of March 2022, there are more than 15,000 cryptocurrencies in existence and listed for trade. The pandemic accelerated the birth of new cryptocurrencies as more than 10,000 of them have come to existence after 2020. Just a decade ago there was only one: Bitcoin. Now, there are cryptocurrencies associated with practically every sector of the economy ranging from those acting as currency – Bitcoin – to those that have utility functions – Ethereum – and yet others that are app or platform cryptocurrencies – Augur. At the same time 91 countries are exploring a Central Bank Digital Currency (CBDC). Nine countries have fully launched their digital currencies and 15 countries, including China and South Korea are in the pilot stage.
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The exponential growth in a largely unregulated global digital currency market over the past five years and the massive volatility therein is threatening the global financial industry and its stability. The crypto market has lost nearly 60% of its market cap in just seven months, crashing from its all-time high of more than $3 trillion in early November 2021 to $1.3 trillion in early May 2022. Add to this the rise of the Fintech industry and the emergence of multitude domestic and cross-border payment systems and investment platforms, the global financial industry has turned into an extremely complex network of entities and stakeholders at the public and private level, threatening its stability and efficiency.
Acknowledging that Bretton Woods Institutions have important roles to play in this front, the Bretton Woods 2.0 Project will propose an actionable set of recommendations for the IMF and the World Bank to transition from simply reacting to the evolving digital landscape to having a pro-active role in legal, regulatory, as well as technical discussions around these issues.
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