The central banks from six countries have come together with the Bank of International Settlements (BIS) to form a working group to study and report on the potential use cases for central banks digital currencies (CBDCs). The joint initiative is backed by Canada, the United Kingdom, Japan, European Union, Sweden and Switzerland.
The announcement was made through a press release on January 21 confirming the collaboration between these major economic powerhouses. They also revealed that the nations will continue to individually study the potential use of the CBDCs in their respective jurisdictions and share their findings with the group.
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. It will closely coordinate with the relevant institutions and forums – in particular, the Financial Stability Board and the Committee on Payments and Market Infrastructures (CPMI).
Membership of the research groups comprises senior representatives drawn from each central bank as well as the BIS. The group will be co-chaired by Benoît Cœuré, the head of the BIS Innovation Hub, Jon Cunliffe, the Bank of England deputy governor, and the CPMI chair. Benoît Cœuré who was recently appointed to head BIS Innovation Hub has championed new approaches to central banks and is a great proponent of their digitalization.
Announcement of this research group is the culmination of a growing interest in digital currencies and popularity of cryptocurrencies such as Bitcoin. Cœuré previously stated that the European Central Bank (ECB) was exploring the potential role of CBDCs. Similarly, Christine Lagarde while heading the International Monetary Fund (IMF) urged central banks to explore digital currencies back in 2018. However, many nations ignored the calls and only began seriously considering the idea after the Libra announcement in June 2019. Since then some nations have announced plans to launch digital currencies with several others have begun seriously exploring their potential application in the future.
Most notably, China is working on their CBDCs with plans to roll out within the year. Thailand’s central bank also announced that it was progressing with its digital currency back in May. Earlier this month, Christopher Giancarlo, the Former Commodity Futures Trading Commission (CFTC) Chairman begun pushing for the adoption of a digital Dollar by the USA.
With so many countries pushing to digital currencies it is only a matter of time before the world gets rid of cash. So much so that the Bank of England Governor, Mark Carney, suggested that digital currency may be the alternative that replaces the US dollar as the global reserve currency.
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