BIS urges cooperation on CBDCs

Using CBDCs within a single system could address some of the problems associated with cross-border payments. This is stated in a BIS report (Bank for International Settlements).

Researchers say national digital currencies are particularly relevant for emerging markets. However, the expansion of the testing of the asset in China and the launch of a CBDC in the Bahamas signal a likely rise in such initiatives, the experts said.

In BIS, they noted that a single system using several digital currencies would solve a number of problems, including slow payment processing.

“These advantages will be hard to achieve if central banks from the outset do not take cross-border aspects into account in designing CBDC and do not coordinate their activities internationally to avoid the mistakes of the past,” the document says.

Experts noted that such cooperation would give central banks a competitive edge over stablecoins. In their view, the diversity of national digital currencies and “strengthening monetary sovereignty” would help prevent the widespread adoption of the latter.

“CBDC, interoperable with others and benefiting from a diverse and competitive market of services, would be a real public good. To achieve this, central banks will need to cooperate,” the BIS researchers concluded.

What is a central bank digital currency (CBDC)?

Earlier, the Reserve Bank of India highlighted the pros of CBDC as expanding access to financial services. But researchers say the launch of a national digital currency could undermine the role of lending institutions.

Jamaica planned pilot testing CBDC in December 2021. The Bank of Japan will begin experiments with its own digital currency in the near future.

Powell said that CBDCs will not replace traditional money, but will coexist with it.

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