The Bank for International Settlements (BIS) and seven central banks are taking forward their work on retail central bank digital currencies (CBDCs) and analyzing policy options and practical implementation issues related to CBDCs. The seven central banks are Bank of Canada, Bank of England, Bank of Japan, European Central Bank, U.S. Federal Reserve Bank, Sveriges Riksbank, and Swiss National Bank. In this context, BIS published three reports that look into user needs and adoption, technological design options, and financial stability implications of retail or "general purpose" CBDCs. BIS and the central banks acknowledge the challenges associated with CBDCs while noting that operating CBDC ecosystem functions would be a significant undertaking and any outsourced functions would need to be carefully managed to deliver public trust in a CBDC system.
The first report on user needs and adoption explores how private-public collaboration and interoperability can be designed into CBDC systems to achieve this objective. Developing and running a CBDC system would be a major undertaking for any central bank. In particular, policies about privacy and access to payment data would be the key design elements to maintain public trust. The second report on design options focuses on how a CBDC could best serve people and businesses in a fast-changing technological landscape. Lessons from previous payment innovations compiled in the report show that success often requires harnessing network effects and not requiring users to obtain new devices. Nonetheless, there would not be a "one-size-fits-all" solution and CBDC adoption strategies would need to consider multiple perspectives through public consultations. The third report on financial stability implications outlines the possible impact of CBDC issuance on banking systems, in terms of intermediation capacity and overall resilience. Preliminary analysis highlights the importance of allowing the financial system time to adjust and the flexibility to use safeguards to influence CBDC adoption. Trusted and resilient money is a precondition for monetary and financial stability.
BIS and the central banks have also outlined the next steps in this collaboration, noting that this group will:
- Continue its practical policy and technical analysis, exploring the intersections between the three papers published and common areas of interest in CBDC research
- Continue to contribute to other complementary international work on CBDCs and the future of payments, including the G7 Digital Payments stream, the G20 cross-border payments roadmap, the CPMI Future of Payments Working Group, and the IMF work on digital money
- Share insights of their work with other central banks, strengthen outreach and dialog, domestically and internationally, and foster an open and informed dialog on CBDC in their respective jurisdictions
Keywords: International, Banking, CBDC, Digital Currencies, Central Banks, CDC Ecosystem, Cross-Border Cooperation, BIS
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