The topic of CBDCs resurfaces, this time as a result of a collaborative report from BIS, the IMF, and the World Bank. The report itself is 30+ pages long and has a glossary of terms, which some may find useful. The referenced article is posted at Markets Insider, providing a brief summary of the key points/conclusions covered in the report along with a link to the actual report itself at the BIS website.
This may be heavy going for some folks, but details five focus areas as building blocks for the enhancement of cross-border payments. An example is focus area B: ‘Coordinate regulatory, supervisory and oversight frameworks’. We have been over this before in various postings and the report has some detail about the different CBDC models underway, such as Project Dunbar, an initiative by the BIS Innovation Hub Singapore Centre in collaboration with MAS, which plans to work with central banks, financial institutions, and technology partners. We have reviewed several CBDC efforts as well on these pages.
“The report, which the group sent to the G20, outlined that so-called CBDCs had the power to offer faster, cheaper, transparent and more inclusive cross-border payments than the traditional financial system. But, the group said, collaboration will be essential….’Implications of CBDCs, even if only intended for domestic use, will go beyond borders, making it crucial to coordinate work and find common ground. If coordinated successfully, the clean slate presented by CBDCs might – in time and in combination with other improvements – be leveraged to enhance cross-border payments,’ the report said….A CBDC is a digital currency issued by a central bank. CBDCs have already been issued by the Bahamas which launched the Sand Dollar and the Eastern Caribbean’s DCash.“
“Central banks like the Federal Reserve, which is looking into a digital dollar, have said the tokens would not be completely anonymous to prevent fraud and money laundering. Account users would need identification to access a wallet for both retail and wholesale use….There is the option of countries restricting the CBDC to residents only, such as is the case with China’s digital yuan….With a number of countries considering their own CBDCs, there are still many unanswered questions around how new and existing infrastructures will co-exist, the impact on monetary policy and what role the private sector might play among others….’In order to achieve the potential benefits for public welfare while preserving financial stability, further exploration on CBDC design choices and their macro-financial implications is essential,’ the report said.“
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
