7 Central Banks Jointly Release CBDC Document

The Bank of International Settlements (BIS) has collaborated with seven other central banks to release a document discussing Central Bank Digital Currency (CBDC) at length, the BIS said in a press release on 9 October.

Tilted “Central bank digital currencies: foundational principles and core features”, the document puts forth some “core principles” for CBDC, and how such a currency should be designed. The report was jointly produced by the central banks of Japan, Canada, the U.K., Sweden, Switzerland, the U.S. Federal Reserve, the European Central Bank and the BIS. The Deputy Governor of the Bank of England, Sir Jon Cunliffe, said in a statement:

“This report is a real step forward for this group of central banks in agreeing the common principles and identifying the key features we believe would be needed for a workable CBDC system. As well as helping central banks to meet their public policy objectives, the report provides a useful framework for how central banks provide money and support payment systems in an ever-evolving digital world.”

The banks have also agreed that if a nation wishes to proceed with issuing a CBDC, it must first meet the three core criteria set out in the document. A potential CBDC needs to be able to work alongside cash and other payment types in a flexible and “innovative” payment system. It should also support “wider policy objectives” and not harm the monetary and financial stability, while at the same time “promote” innovation and efficiency. The document reads:

“A CBDC robustly meeting these criteria and delivering the features set out by this group could be an important instrument for central banks to deliver their public policy objectives.”

Even though the document has set out some core principles for how a nation should go about issuing a CBDC, the BIS made it clear that no bank has committed to any actual issuance. The report reads:

“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.”

A number of central banks around the world have started their own research into digital assets, making CBDC a hot topic in 2020. This month alone saw the central bank of Estonia launch a research project connected to CBDC, while the Bank of Korea revealed that it will soon enter the final testing phase of its CBDC project.

When talking about CBDCs there is one name that cannot be skipped, China. Earlier this week an official from the People’s Bank of China (PBoC) revealed that more than 3 million transactions, worth around $162 million, have been conducted in the cities of Shenzhen, Suzhou and Xiong’an using the bank’s digital yuan. While there is still no official release date for the digital yuan, the bank has been putting the CBDC through more and more tests as of late.