Britta Dottger, Head of Treasury at Roche explains how Central Bank Digital Currencies (CBDCs) could impact treasury. Payments and settlements of financial transactions could be faster, safer, less error prone and at reduced costs.
At Roche Treasury we have always been interested in exploring and experimenting new ways to solve business challenges and service our divisions better. With CBDCs – among others – the future of money could be rewritten. Depending on their design and purpose, digital currencies could enable new customer centric business models and financial inclusion with fit-for-purpose features at its core. As well as tokenised Fiat money, CBDCs may provide significant value to corporates and societies by allowing timelier, seamless and more secure collaboration across central banks, countries, corporates and individuals. Payments and settlements of financial transactions could be faster, safer, less error prone and at reduced costs. New formats of money may offer an opportunity to better align the world’s financial system with the realities and challenges that businesses are facing in the digital age.
CBDCs and tokenised Fiat money from commercial banks offer the opportunity to enhance the financial system to keep up with today’s business realities and challenges. Depending on the design of new forms of money, we could walk away from batch processing and benefit from micro payments and a higher velocity of money. We would be able to support pay-per-use business models and to continuously perform payments and fundraising. Instant delivery against payment would be possible. Intraday limits between banks and corporates could be eliminated. In addition, CBDCs could release treasury from monitoring and managing credit limits of counterparts. This would make daily treasury life enormously easier. In other words, we would operate in a new and different payment and financial markets infrastructure than today.
We are engaging with players in the ecosystem and we are trying to understand what our banks are working on. We are in dialogue with experts, building our knowledge and initiating proof of concepts and pilots to explore these new opportunities. We are building an infrastructure that allows us to handle new forms of money and we are teaming up with blockchain enthusiasts across our company. At Roche we are already part of blockchain ecosystems and use these technologies for our divisions.
Many of our commercial banking partners invest time and effort to embrace new opportunities arising from digital currencies. We sense a broad spectrum of engagement and some scepticism around timely readiness of central banks. Some of our banking partners are exploring digital opportunities beyond CBDCs to leverage new functionalities for their own treasury operations and for their business with corporate clients.
Existing payment systems no longer meet our needs. We still need several intermediaries to conduct a cross-border payment, which makes the process slow, costly and fraud-prone. In the digital age, we would wish to see not only domestic but also cross-border payments be executed much faster. Even with SWIFT, we still sometimes lack transparency where the money sits and where fees are deducted. To settle big volume transactions like M&A or bonds, the settlement day is a challenge and often cumbersome – amounts have to be sliced in tranches to run through the system. Delivery against payment is possible with escrow accounts or when all involved parties use the same bank – which, from a counterparty risk perspective, is not a preferred option. Different payment format-requirements and cut-off times that vary among banks drive costs and complexity at our end.
Depending on the design and characteristics of CBDCs, these currencies could join business transactions as cash/money on chain and automatically execute smart contracts including payments and book entries in individual ERP systems of respective business partners. Saving resources in reconciliation and administrative tasks would enable everyone to focus on innovation and value creation to the benefit of societies.
