A group of the world’s most influential central banks have teamed up to pool expertise on central bank digital currencies.
The Bank of Canada, the Bank of England (BoE), the Bank of Japan, the Sveriges Riksbank (Sweden) and the Swiss National Bank, together with the European Central Bank (ECB) and the Bank for International Settlements (BIS), are to share experiences as they assess the potential for central bank digital currency (CBDC) in their home jurisdictions. The move was confirmed in an announcement last week.
The newly formed group will assess CBDC use cases; economic, functional and technical design choices, including cross-border interoperability; and the sharing of knowledge on emerging technologies.
It will co-ordinate with relevant institutions and forums, including the Switzerland-headquartered Financial Stability Board (FSB) and the Committee on Payments and Market Infrastructures (CPMI). The CPMI, which is housed within BIS, meets about three times annually and is the global standard-setter for payment, clearing and settlement services.
The group will be co-chaired by the BoE’s deputy governor, Jon Cunliffe, and former ECB executive and recently appointed head of the newly formed BIS Innovation HUB, Benoît Cœuré.
The BIS Innovation Hub was set up in 2019 to encourage central banks to collaborate on financial technology, and operates in three locations: Switzerland, Hong Kong and Singapore. Cœuré, who began a five-year term as head on 15 January, also led the Group of Seven working group on global stablecoins and co-chairs a related FSB working group.
Cunliffe chairs the CPMI – he succeeded Cœuré – having begun a three-year term this month.
According to research from blockchain and cryptocurrency news site The Block, 18 central banks have publicly announced the development or launch of their own CBDC. Global Government Forum has tracked digital currency efforts of the ECB, as well as central banks in Lithuania, China and South Africa. Other examples of state-backed digital currency initiatives include Project Ubin, led by the Monetary Authority of Singapore, and Sweden’s e-krona.
Digital money initiatives by major US-headquartered technology companies are also making waves. Among the highest profile is Facebook’s controversial Libra. The social-media giant’s proposed cryptocurrency has faced regulatory and political scepticism from authorities including central banks. Concerns include its potential to interfere with sovereign monetary policy.
The World Economic Forum (WEF) last week released a white-paper on CDBCs. The authors of the 28-page report, which is described as a ‘toolkit’, say they are aiming to “address the need for a concise, high‑level CBDC decision framework that provides comprehensive and risk‑aware information to policy‑makers”.
“Given the critical roles central banks play in the global economy, any central bank digital currency implementation, including potentially with blockchain technology, will have a profound impact domestically and internationally,” said the WEF’s head of blockchain and distributed ledger technology, Sheila Warren. “It is imperative that central banks proceed cautiously, with a rigorous analysis of the opportunities and challenges posed.”