BIS Annual Report Reveals Increased Activity in CBDC; Emphasis on Policy Not Competition


The Bank for International Settlements (BIS) Annual Economic report has revealed that Central Bank Digital Currencies (CBDC) are gaining popularity and could play an essential role in the digital innovation era.

Covered in a particular chapter ‘Central banks and payments in the digital era,' the report paints a picture of the ongoing activity in this space. Notably, the COVID-19 pandemic and Libra proposal are some of the factors that significantly accelerated research and development on CBDC's.

The Switzerland headquartered organization has since encouraged central banks to consider CBDC's noting the underlying opportunity in digital policy creation:

“One option at the frontier of policy opportunities is the issuance of CBDCs, which could amount to a sea change.”

The Push Factors

According to the BIS report, COVID-19 has accelerated the shift towards digital ecosystems, not sparing payment networks. The report highlights that there has been a sharp decline in cash transactions leading to a surge in e-commerce services.

Consequently, financial watchdogs are also embracing the new ‘normal' hence the efforts towards CBDC's in recent months.

As the U.S issued stimulus checks at the height of the pandemic, the vulnerabilities of its payment ecosystem were highly exposed. The BIS report points out that social inequalities attributed to payment ecosystems can, therefore, be solved with CBDC frameworks:

“The crisis has amplified calls for greater access to digital payments by vulnerable groups and for more inclusive, lower-cost payment services going forward.”

Another factor was Libra's announcement back in 2019; the Facebook-led project sounded a warning for regulators globally as per the report. Before this, most had taken a laid-back approach with minimal activity in research. However, the Libra proposal has awakened a CBDC frenzy within a year.

Focus is on Policy, Not Competition

While private stablecoin proposals may have spurred the move towards CBDC's, the organization said that regulators are focused on the policy as opposed to competition.

“CBDC issuance is not so much a reaction to cryptocurrencies and private sector ‘stablecoin’ proposals, but rather a focused technological effort by central banks to pursue several public policy objectives at once.”

At the moment, China is the most advanced jurisdiction in a CBDC integration. The Asian superpower rolled out a pilot for the digital yuan as soon as it emerged from the COVID lockdown. The PBoC backed digital currency is expected to equip China's watchdogs with access to digital payment ecosystems.

With most of the population already using Alipay and WeChat, a migration towards digital monetary policy might not be complicated. Other nations that have signaled they will embrace a CBDC include Italy and France, which are both ready for a digital Euro.

Get Daily Headlines

Enter Best Email to Get Trending Crypto News & Bitcoin Market Updates

What to Know More?

Join Our Telegram Group to Receive Live Updates on The Latest Blockchain & Crypto News From Your Favorite Projects

Join Our Telegram

Stay Up to Date!

Join us on Twitter to Get The Latest Trading Signals, Blockchain News, and Daily Communication with Crypto Users!

Join Our Twitter

Add comment

E-mail is already registered on the site. Please use the Login form or enter another.

You entered an incorrect username or password

Sorry, you must be logged in to post a comment.
Bitcoin Exchange Guide