Six Major Central Banks have created a group with the Bank for International Settlements (BIS) to research central bank digital currencies (CBDC). The group will facilitate collaboration in the area of digital currency development and encourage the sharing of previous research and trials conducted.
23 January, 2020 | AtoZ Markets – Several central banks in the world have already started to research, experiment and pursue various forms of digital currency, including CBDCs. The Bank of England (BoE) has announced that it will explore potential use cases for the CBDC in their home jurisdictions.
Six Central Banks Form Alliance to Research on Digital Currencies
The BoE has created a group with five other central banks to explore the CBDCs, according to an announcement released Tuesday. They are:
- The Bank of Canada,
- The Bank of Japan,
- The European Central Bank,
- Sveriges Riksbank (Sweden) and
- The Swiss National Bank.
The Bank for International Settlements (BIS) will oversee the group. It will also be co-chaired by Benoit Coeure, head of the BIS Innovation Hub, and Jon Cunliffe, deputy governor of the Bank of England.
The BIS set up the hub last June to encourage international collaboration on innovative financial technologies within the central banking community. Later, the Swiss National Bank signed an agreement with the BIS to open the hub in the country to research a blockchain digital currency. The group of six central banks and the BIS will now evaluate:
CBDC use cases, economic, technical and functional design choices, including cross-border interoperability, and knowledge sharing on emerging technologies.
The group will also coordinate closely with relevant institutions and forums, in particular:
- Financial Stability Board
- Committee on Payment and Market Infrastructure (CPMI).
CBDC Development around the World
At least two central banks of the group (Sveriges Riksbank and the European Central Bank) are already developing their sovereign digital currencies. The Bank of Canada and the Swiss National Bank have also been researching CBDCs for some time.
The participation of the BoE and the Bank of Japan in the group appears to be a new development. In August, BoE Governor Mark Carney said that a CBDC could replace the US dollar as a global hedging currency.
European Central Bank President Christine Lagarde also remained optimistic about the CBDC. Earlier this month, Lagarde said CBDCs could provide citizens with a medium of exchange if “physical cash eventually declines”.
The Chinese central bank appears to be ahead of other central banks in the race for CBDCs. Recently, the People’s Bank of China (PBoC) also said it had completed the high-level project of its digital currency. The PBoC has been engaged in research and development of its digital currency since 2014. Moreover, the long-awaited digital yuan will be distributed first to commercial banks. Then users and businesses will be able to register digital wallets with these commercial banks, the PBoC recently said.
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