Seven Major Central Banks Collaborate to Release First CBDC Report, Highlighting Key Principles
The Bank of International Settlements (BIS), along with seven other prominent central banks, has published a report on the feasibility of issuing CBDCs to complement monetary policy. According to the 26-page document, CBDC’s should be based on foundational principles and core features that will enable the prospectus digital currencies to function effectively.
The report, which is dubbed ‘Central Bank Digital Currencies: Foundational Principles And Core Features,’ is a collaborative effort between the following:
- Bank of Canada
- Bank of England
- Bank of Japan
- European Central Bank
- Federal Reserve
- Sveriges Riksbank
- Swiss National Bank
- Bank for International Settlements (BIS)
It was published on October 9 and will mark the first of its series, given that the BIS is expected to advance the CBDC research in collaboration with central banks.
CBDC Foundational Principles & Core Features
According to the report, a functional CBDC will need to meet some criteria when it comes to the underlying principles and core features. It highlighted three principles which include;
- Coexistence: CBDCs should co-exist with other types of money that already run today’s markets.
- Innovation and Efficiency: Features should focus on promoting efficiency and innovation.
- Do No Harm: CBDC introduction should not compromise the current financial or monetary ecosystems but complement them instead.
The 14 core features were, in turn, derived from these principles; some of the notable recommendations that were made include;
- Secure and Resilient; To uphold the operational integrity of CBDC ecosystems.
- Convenient; To enable seamless interaction with existing fiat currencies.
- Value additional; To include the private sector and create a competitive environment for innovation.
The BIS co-chair and head of innovation hub, Benoît Cœuré, said that the newly released report would provide an opportunity to further delve into CBDC’s,
“A design that delivers these features can promote more resilient, efficient, inclusive, and innovative payments.
Although there will be no ‘one size fits all' CBDC due to national priorities and circumstances, our report provides a springboard for further development of workable CBDCs.”
The Rise in CBDC Interest
Recent months have seen a growing interest in the CBDC space; China, which piloted its digital yuan back in Q2, is now boasting close to $162 million e-RMB transactions. This initiative has particularly fueled the CBDC craze as other giant economies look to get a cutting edge.
South Korea announced this week that it will also pilot it's ‘digital won’ in 2021, although they are yet to settle on whether a CBDC will be necessary. Likewise, the latest BIS CBDC report's contributing members did not signal that their respective jurisdictions will be launching CBDCs.