The latest release on CBDCs appears at the International Investment site and speaks to unrelated efforts by Bank of England and Monetary Authority of Singapore to further explore their own central bank digital currencies. The reason both are mentioned is because both BoE and MAS released statements on the subject on the same day, November 9. The MAS statement was issued by Ravi Menon in a speech at the Singapore Fintech Festival.
‘Bank of England and the UK HM Treasury announced on 9 November that they will conduct a consultation next year into the possible implementation of a UK central bank digital currency… The “next steps on the exploration of a UK Central Bank Digital Currency” (CBDC), which would be a new form of digital money issued by the Bank of England and for use by households and businesses for their everyday payments needs, would exist alongside cash and bank deposits, rather than replacing them… The statement further said in 2022, they will launch a consultation which will set out their assessment of the case for a UK CBDC, including the merits of further work to develop an operational and technology model for a UK CBDC.’
‘In a separate development, Ravi Menon, managing director of the Monetary Authority of Singapore also set out his thoughts on a digital currency at the Singapore FinTech Festival on 9 November 2021… In the speech “The Future of Money, Finance and the Internet” Menon said the MAS “frowns on cryptocurrencies or tokens as an investment asset for retail investors. The prices of crypto tokens are not anchored on any economic fundamentals and are subject to sharp speculative swings. Investors in these tokens are at risk of suffering significant losses”… But he added that “MAS is also of the view that blockchains and crypto tokens can bring many potential benefits”.’
These efforts have been underway with both central banks for some time now, so this is just a more formal way to express next steps in the process. The only question is how far the use cases will go, and when, not if. This has been more or less understood now for a couple of years as many CBs have undertaken such studies. As we have pointed out several times in these pages, the Boston Fed in the U.S. has been suggesting that their co-efforts with MIT over the past year or so will result in a published results paper, which has yet to appear. We expect some similar near-term effort to establish a clear path forward when that happens..
‘If the results of this ‘development’ phase conclude that the case for CBDC is made, and that it is operationally and technologically robust, then the earliest date for launch of a UK CBDC would be in the second half of the decade… Economic Secretary to the Treasury, John Glen, said: “This consultation will begin an open discussion on the role a UK central bank digital currency might play in the UK.’
‘As for central bank digital currencies he said “MAS is embarking on Project Orchid – to build the technology infrastructure and technical competencies necessary to issue a digital Singapore dollar should Singapore decide to do so in future… “MAS will pursue Project Orchid in close partnership with the private sector, building on the rich findings from the Global CBDC Challenge that MAS launched earlier this year. We have received more than 300 proposals from over 50 countries in response to the problem statements we posed.”‘
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group