6 Central Bank Creates a Digital Currency Use Case Working Group
Six central banks have set up a working group with the International Bank of Recognition (BIS) to share the findings, while each investigating possible cases for the central bank digital currencies (CBDC).
The group will consist of the central banks of Sweden, Canada, Switzerland, the UK and Japan, as well as the European Central Bank (ECB) and BIS. Each institution, announced by all seven members on Tuesday, will continue to evaluate CBDCs' economic, functional and technical design options, including cross-border interoperability, and will share findings.
Members will also work closely with the Payments and Market Infrastructures Committee (CPMI), an international standard setter for payments and clearing, and the Financial Stability Board (FSB), a referral organization for the global financial system it has previously warned about. About potential risks associated with stabilcoins.
The working group will be led by the newly appointed BIS Innovation Center head Benoît C atanuré and Bank of England vice president and CPMI chief Jon Cunliffe. Senior representatives of other bank members will also be included.
Cœuré headed the Innovation Center in part to lead BIS's efforts to discover central bank funds. Speaking to journalists earlier in November, ECB said it was evaluating the future role of CBDCs when the bank was a member of the Executive Board. He also chaired a G7 working group investigating the global impact of fixed currencies.
Although widely supported by private initiatives in this area, Cœuré famously called Bitcoin the “bad birth of the financial crisis” in late 2018.
Christine Lagarde is also on the central banks to begin seriously exploring digital money in late 2018, when the interest for CBDCs, which was later called the head of the International Monetary Fund, really rose after the Libra announcement last summer. Since then, the possibility of private currency initiative has transformed central bank research and development into digital currencies.
The central bank of Thailand announced in May that it is proceeding with its own digital money project. Bank of England (BoE) Governor Mark Carney even suggested that digital reserve could replace the US dollar as a global reserve currency. China, which wants to release Libra, is reported to have full throttle in its CBDC.
The new seven-member working group is not the first example of central bankers working together on distributed ledger technology (DLT). Since 2016, ECB and the Bank of Japan have been working together to publish joint research reports investigating how DLT can be integrated into the global financial infrastructure.
According to law firm Ashurst's senior partner, Bradley Rice, BoE has previously tried various cryptocurrency initiatives, but advances in blockchain technology may mean "now may be the right time to try again."
A perfect global competition storm, the (possible) decline of the US dollar, and special alternatives like Libra meant "more proactive in the search for digital currencies before they become existent" for central banks like BoE. "he added.