The uses of stablecoin in cross-border asset trading have multiplied in recent years, and central banks and international institutions such as the International Monetary Fund (IMF) and the Bank for International Settlements (BIS) have taken them into consideration. The SDCs are not grounded on existing currency-issuing logic or international settlement regulations. SDCs could potentially become a common medium of trade and even part of national reserves, which would lead to a major disruption of the international trading system and the current single-currency-dominated financial order.
New governance thinking for the Web 3.0 world
Web 3.0 overturns the world order in many aspects. Not only will it alter the current global economic architecture, credit relations, and the formation of organizations, it will also change the meaning, validity and extent of sovereignty, borders, social contracts, and the roles and jurisdictions of states. It poses an unconventional set of challenges to both global and domestic governance which will have profound social, economic and geopolitical implications. Few existing mechanisms, norms, policies, institutions and governing frameworks are sufficient to address them.
What is needed is a fundamental paradigm shift in governance thinking on several levels to tackle these challenges:
First, rethink the key actors. Traditionally states are the main actors in governance issues. What each state can do, however, will be limited in a decentralized digital world that transcends national borders. Most international organizations today do not typically have jurisdiction over national issues. (The European Union is one example of a supranational entity that has legal authority in sovereign states.) In the Web 3.0 world, digital sovereignty is yet to be defined.
Second, rethink the structure. The current world order rests on the logic of a centralized power hierarchy. This will change in the new decentralized reality. The shapes and forms of processes or solutions for economic and social transactions will be very different from anything that exists today. These will inspire new ideas to tackle the existing problems in the anarchical world without global government in which we live – from climate change to poverty.
Third, rethink the mechanism. With the change in basic logic and forms of structure, so will the operating mechanism have to be recast. Much of our existing governing instruments will prove obsolete and many new ones will be required. They will have to be very different. For example, SDC payments will enable embargoed states to bypass the global interbank clearing system, making economic sanctions invalid. CBDCs and SDCs may cause countries of weak currency credibility to lose monetary sovereignty and diminish the effect of their monetary policy. The current governing institutions and regulatory framework are not compatible with such new realities. The rules must be rewritten.
Fourth, rethink the intellectual framework. Current academic structure segments and fragments the universe of knowledge, creating “experts” in specific disciplines. Already, many governance issues do not so neatly come under one area or silo. Training people to think about systems, about how all the dots connect, will require radical changes in education.
The responsibility, therefore, falls upon the next generation of global leaders and thinkers to hone the intellectual capacity to provide the new thinking and approaches needed. They must dare to be provocative, ask critical questions, not be guided by conventional wisdom, and transcend disciplinary barriers to harness the talent required to face challenges that today are unimaginable.