Cen­tral banks team up to study case for dig­i­tal cur­ren­cies

Muscat Daily - - BUSINESS -

Lon­don, UK - Some of the world’s major cen­tral banks are team­ing up to as­sess po­ten­tially de­vel­op­ing their own dig­i­tal cur­ren­cies, ac­knowl­edg­ing that their role is be­ing chal­lenged by new tech­nolo­gies and pri­vate sec­tor ini­tia­tives such as Facebook Inc’s Li­bra.

A group has been formed in or­der to ‘ share ex­pe­ri­ence as they as­sess the po­ten­tial cases for cen­tral bank dig­i­tal cur­rency in their home ju­ris­dic­tions’, ac­cord­ing to joint state­ments on Tues­day. The body will be made up of the Bank of Eng­land (BOE), Bank of Canada, the Bank of Ja­pan, the Euro­pean Cen­tral Bank, the Riks­bank and the Swiss National Bank, along with the Bank for In­ter­na­tional Set­tle­ments (BIS).

‘The group will as­sess CBDC use cases; eco­nomic, func­tional and tech­ni­cal de­sign choices, in­clud­ing cross-bor­der in­ter­op­er­abil­ity; and the shar­ing of knowl­edge on emerg­ing tech­nolo­gies,’ the BOE state­ment said. It will be co-chaired by BOE deputy gov­er­nor Jon Cun­liffe and for­mer-ECB of­fi­cial Benoit Coeure - now head of the BIS’s in­no­va­tion hub.

Ab­sent from the group is the Peo­ple’s Bank of China, which is poised to be­come the first major cen­tral bank to is­sue a dig­i­tal ver­sion of its cur­rency.

Coeure has pre­vi­ously said he’s ‘per­son­ally pretty sure’ that dig­i­tal to­kens backed by pub­lic au­thor­i­ties will be part of the fu­ture.

The de­bate around such a cur­rency in­ten­si­fied last year when BOE gov­er­nor Mark Car­ney laid out a rad­i­cal pro­posal for an over­haul of the global fi­nan­cial sys­tem that would even­tu­ally re­place the dol­lar as a re­serve with a Li­bra-like vir­tual to­ken.

While Facebook’s plans sparked a back­lash among gov­ern­ments, Li­bra raised the ques­tion of whether pub­lic au­thor­i­ties risk be­ing left be­hind as con­sumers turn to pri­vate-sec­tor ini­tia­tives that skirt the tra­di­tional bank­ing sys­tem.

ECB pol­icy mak­ers, un­der the new lead­er­ship of Chris­tine La­garde, have al­ready dis­cussed the idea of is­su­ing their own dig­i­tal cur­rency. She has long ar­gued that cen­tral banks should con­sider the mer­its, which she be­lieves in­clude pub­lic goals such as fi­nan­cial in­clu­sion, con­sumer pro­tec­tion and pay­ment pri­vacy. In­ter­nal doc­u­ments have shown the ECB also sees a case for such a move, if the pri­vate sec­tor can’t make crossborde­r pay­ments faster and cheaper.

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