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Fragmented digital infrastructure across countries could pose significant risks to global financial stability, the Bretton Woods Committee has warned, calling for common standards to connect national digital systems and enable them to work seamlessly within and across borders.
The Bretton Woods Committee (BWC) is a non-profit organisation that promotes global financial cooperation. In its report the committee said countries risk building separate, incompatible digital systems instead of developing open infrastructure that can support cross-border economic activity. For a country to benefit though, each foundational digital raila platform or protocol that moves data and credentials at near zero marginal cost such as the internet, GPS, Indias Aadhaar and the Unified Payments Interface (UPI), Brazils Pix, and Estonias X-Roadmust connect to another within the country as well as across its borders, the report said. Without such connectivity, the global economy could end up with 100 cheap, fast, incompatible national systems rather than a genuinely open and interoperable infrastructure. The committee warned that fragmentation could extend beyond limiting the usefulness of individual platforms and create risks for global financial stability. The report identified three major gaps in the current framework: governance, adoption and accountability. It said there is no global forum to establish common standards for digital infrastructure, while more than 100 countries lack the technical capacity to build and maintain sophisticated population-scale systems. The third gap concerns accountability, with no international mechanism to coordinate investigations and responses when digital infrastructure fails. The report called for these gaps to be addressed as countries increasingly depend on digital systems to deliver services and support economic activity. Financing is another constraint. The report said development institutions allocate less than 1 per cent of their infrastructure portfolios to digital infrastructure, despite its potential to support multiple development objectives. It argued that the funding shortfall needs to be addressed alongside the lack of technical capacity and common standards. Rather than proposing a new global institution, the committee called for existing multilateral bodies to coordinate efforts. It recommended that the G20 lead global coordination, the Organisation for Economic Co-operation and Development harmonise best practices, and the International Monetary Fund extend these practices through its surveillance and lending functions. The World Bank and regional development banks were also urged to support implementation, including by linking lending to open standards and interoperability. The report proposed a model in which governments establish the vision and standards, private companies design and deliver digital infrastructure, and regulators ensure that systems remain open and interoperable. It said coordinated action would be necessary to build digital infrastructure that supports economic growth while limiting the risks created by fragmented and poorly governed systems. (ANI)
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