BIS requires international cooperation on digital central financial institution currencies
LONDON – Top Financial Institutions Call For Global Collaboration On Central Bank Digital Currencies.
The Bank for International Settlements, the global body for central banks, released a report on Friday saying that central banks should work to achieve “interoperability” between their digital currency projects.
This can be achieved in a number of ways, the report says, for example by creating common standards and establishing international payment infrastructures.
The report was drawn up in collaboration with the International Monetary Fund and the World Bank.
Several central banks are studying digital currencies that central banks would issue to commercial banks or directly to the public. Their efforts have intensified over the past year amid the decline in cash use and growing interest in cryptocurrencies like Bitcoin.
A photo illustration showing a gold chain, silver coins, and visual representations of Bitcoin placed on various currencies.
Yuriko Nakao | Getty Images
The People’s Bank of China has taken on a pioneering role, with real tests already being carried out in several cities.
“I think that every central bank, every country should have its own sovereign currency,” said Agustín Carstens, director general of the Bank for International Settlements (BIS), to Annette Weisbach from CNBC on Friday.
“Given that pretty much all central banks are thinking about it, this is a unique opportunity for the various central bank digital currencies to be interoperable,” said Carstens, adding that global central banks should ensure that their systems are “congruent” and transactions in different currencies can be carried out seamlessly. “
The BIS is an umbrella organization of central banks that represents institutions from the US Federal Reserve to the People’s Bank of China. Their report with the IMF and World Bank said that digital currencies from central banks or CBDCs could enable cheaper and faster cross-border payments.
Currently, “payment from, for example, Mexico to the US can take days,” said Carstens. “Sometimes the commissions you pay are 7%. That’s ridiculous.”
“We have to take advantage of the fact that pretty much everyone starts with a new beginning table in order to be able to include the networking of the various systems from the beginning.”
However, the BIS report highlighted a number of open issues with CBDCs that have yet to be resolved, such as the role of “private sector” actors.
Diem, a digital currency proposed by Facebook, was widely condemned by regulators when it was launched in 2019.
Meanwhile, so-called stablecoins like Tether – which are often backed by sovereign currencies like the dollar – have drawn increasing criticism from economists and regulators due to a perceived lack of transparency.