BIS, along with a group of seven central banks, published a report that assesses the feasibility of publicly available central bank digital currencies (CBDCs) in helping central banks deliver their public policy objectives. The report identifies the foundational principles and core features of a central bank digital currency, also highlighting that any approach to issuing a central bank digital currency will naturally be cautious, incremental, and collaborative. The report recommends next steps to explore in this area, but does not give an opinion on whether to issue such a currency. The seven central banks involved in this assessment are Bank of Canada, BoE, Bank of Japan, Central Bank of Sweden, ECB, FED, and SNB.
The report highlights three key principles for a central bank digital currency. The first principle specifies that such a currency should be able to coexist with cash and other types of money in a flexible and innovative payment system. The second principle states that the introduction of such a currency should support wider policy objectives and do no harm to monetary and financial stability while the third principle stipulates that its features should promote innovation and efficiency. Based on these principles, the group has identified the following core features of any future central bank digital currency system, which must be:
- Resilient and secure to maintain operational integrity.
- Convenient and available at very low or no cost to end users.
- Underpinned by appropriate standards and a clear legal framework.
- Have an appropriate role for the private sector, as well as promoting competition and innovation.
The next stage of research and development on the central bank digital currency will emphasize individual and collective practical policy analysis and applied technical experimentation by central banks. This report highlights design and technology considerations of such a currency, including initial thoughts on where trade-offs lie. Far more work is required to truly understand the many issues, including where and how a central bank should play a direct role in an ecosystem and what the appropriate role might be for private participation. Given the speed of innovation in payments and financial technology, the group recognizes the need to prioritize this work appropriately and proceed quickly. As a result, the group recommends the following:
- This group of central banks, along with BIS, will continue to work actively and collaboratively on the central bank digital currency and will further explore the practical implications of the core features set out in this report while advancing our understanding of other open questions (for example, the trade-offs in designs that aim to mitigate financial stability risks). They will also explore practical issues and challenges for cross-border transfer of domestic central bank digital currency and contribute to these international workstreams.
- BIS should continue promoting information-sharing and collaboration between central banks on central bank digital currency research
- BIS Innovation Hub should explore further technological experiments that could support the work on digital currency; the group supports the plans to explore the technologies that could enable interoperability and cross-border transactions between domestic central bank digital currencies.
- The group will continue domestic outreach efforts to foster an open and informed dialog on central bank digital currency in their respective jurisdictions. The group will provide domestic stakeholders with opportunities to participate in this dialog and will reach out to other central banks, including in developing economies, and to international organizations.
Keywords: International, Banking, PMI, CBDC, Cross-Border Payments, Regtech, Digital Currencies, Central Banks, BIS
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