In this episode of FRT, Jessica Renier, Managing Director of Digital Finance at the Institute of International Finance, discusses geopolitical and institutional frameworks as we close out 2022 and look forward to 2023. The environment in which financial institutions operate shapes priorities, and in turn, the workplans of global standard setting bodies with respect to digital finance.
Jessica outlines themes from 2022 that shaped the environment:
• Fragmentation – Increasing march away from global cooperation toward protectionism and fragmentation. The Russian invasion of Ukraine exacerbated this.
• Strategic Autonomy and Technological Autonomy – Desire for self-sufficiency and independence as primary drivers for decisions regarding the future of the financial system.
• The Soul of Money – Questions regarding what the future of money looks like, be it central bank money, commercial bank money, or other privately issued money.
• Point of Correction – The natural maturation of innovation and the expectation of corrections for speculation. But beyond this, recognition that many risks are not novel, and many projects have failed due to mismanagement of well-known risks that are familiar to regulators and seasoned risk managers. Age-old stories.
• Background of the G20 – Indonesian presidency and the transfer to India. Implications for cross-border payments, data frameworks, and priorities in the context of sanctions.
2023 begins amid:
• a rapidly evolving digital asset market,
• potential CBDCs under development,
• a drumbeat for greater consumer control of data,
• C-Suite focus on guidance for the use of AI and Machine Learning, and
• a continued problematic march toward data localization.
Themes involving normalization, trust, and the search for real value with long-term staying power will be important. Jessica discusses these in a macro-level look at 2023.