Thursday, October 22, 2020

Central banks detail CBDC expectations in massive joint document

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With Central Bank Digital Currencies a point of focus across the globe, a number of countries’ banking authorities have jointly produced a document discussing the currency type at length. 

The Bank for International Settlements told Cointelgraph in a statement that a group of seven central banks and the BIS had collaborated on the report, “identifying the foundational principles necessary for any publicly available CBDCs to help central banks meet their public policy objectives.” The BIS is a global institution helping out national central banks.

CBDCs have been a hot topic in 2020, with a number of countries expressing interest in the asset type. China has pushed forward with plans for its CBDC, the digital yuan, although China’s central bank did not contribute to the report. China is in the midst of testing its digital asset, and has completed approximately $162 million USD worth of digital yuan transactions. 

The Bank of England, the U.S. Federal Reserve and the Bank of Japan sit among the governing bodies involved in crafting the document, titled: Central bank digital currencies: foundational principles and core features. However the statement from the BIS made it clear that the involved parties had not included opinions in the report regarding the launch of such a currency, nor did they specify any firm plans for producing such an asset. 

The report clarified:

“This report is not about if or when to issue a CBDC. Central banks will make that decision for their jurisdictions (in consultation with governments and stakeholders). None of the central banks contributing to this report have reached a decision on whether or not to issue a CBDC.”

The report listed a trio of necessary fundamental principles upon which a future CDBC, and its related ecosystem, should be founded, if such an asset arises.

“A central bank should not compromise monetary or financial stability by issuing a CBDC; (ii) a CBDC would need to coexist with and complement existing forms of money; and (iii) a CBDC should promote innovation and efficiency.”

The document clarified that vital components of sound CBDCs include convertibility, convenience, security, speed, scalability, legal soundness and several other categories.

Brazil’s central bank has also expressed interest in a CBDC in recent months, although the report also did not list Brazil’s central bank as a contributor. In contrast, the Bank of Japan does grace the list of reported contributors. Japan boasts a team tasked with studying CBDCs. 

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