A joint report released by the 7 major central banks in the world has been published.
The report, called “Central Bank Digital Currencies: Foundational Principle and Core Features” is expected to become the de facto standard for building and deploying Central Bank Digital Currencies (CBDCs) around the world.
The joint report, in partnership with Bank for International Settlements (BIS), is expected to be adopted by the majority of central banks around the world who account for about 95% of the world’s GDP, which includes the majority of African countries.
The joint report was a collaborative effort by 6 major central banks that included:
- The United States Federal Reserve
- Bank of England
- Bank of Canada
- European Central Bank
- Bank of Japan
- Sverges Riksbank
- Swiss National Bank
Governor @njorogep: The three questions that Central Bank Digital Currency (CBDC) must answer pic.twitter.com/ynkH8m5FnW
— Central Bank of Kenya (@CBKKenya) October 8, 2020
According to the report, a CBDC is a new type of central bank money that is different from the current electronic bank deposits and physical cash. It will require an underlying system to provide and distribute it conveniently to the public.
This system would comprise:
- The central bank
- Operator (s)
- Participating service providers and banks
- Others – data service providers, applications and POS devices for initiating and accepting payments
Sir Jon Cunliffe, co-chair of a working group on central bank digital currencies, Deputy Governor of the Bank of England, and Chair of the CPMI, discusses the opportunities and risks of potential central bank digital currencies @bankofengland https://t.co/trae0THxdX pic.twitter.com/nhYHY8QnBN
— Bank for International Settlements (@BIS_org) October 9, 2020
The report acknowledges that while there will be no ‘one size fits all’ CBDC and that CBDCs are not meant to replace cash, they offer a fast and convenient approach to digital payments which have grown enormously in volume and diversity.
“CBDC issuance and design are sovereign decisions to be made by each jurisdiction. This report is not about if or when to issue a CBDC. Central banks will make that decision for their jurisdictions (in consultation with governments and stakeholders). None of the central banks contributing to this report have reached a decision on whether or not to issue a CBDC.
Instead, this report advances the foundational international work by outlining common principles and the key features a CBDC and supporting infrastructure would need in order to contribute to central bank public policy objectives.”
The 3 principles emphasized in the report are:
- A central bank should not compromise monetary or financial stability by issuing a CBDC
- A CBDC would need to coexist with and complement existing forms of money
- A CBDC should promote innovation and efficiency
You can download the full report here.
About BIS
The Bank for International Settlements (BIS) is an international organization that serves central banks and other financial authorities across the globe to build a greater collective
understanding of the world economy, fosters international cooperation among them and
supports them in the pursuit of global monetary and financial stability.
BIS members make up 95% of the world GDP.
Some of the African central banks who have voting rights and representation at BIS General Meetings include:
- Bank of Algeria
- Central Bank of Morocco
- South African Reserve Bank
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