Before its next annual report, the Bank for International Settlements (BIS) published a special chapter of this report on digital payments, in particular the central bank’s digital currencies, on June 24, a subject that has aroused great interest in recent months.
The report encourages central banks to treat CBDCs as their future, saying, “One option at the limit of policy opportunities is the issuance of CBDCs, which could be a radical change.”
A recent change in favor of CBDCs
The BIS noted that interest in CBDCs has changed significantly since the beginning of this year, based on positive or negative speeches.
Source: Bank for International Settlements
The COVID-19 pandemic has affected this change, the report said, citing an increase in cash reserves, online trading and the fact that “public concern about the transmission of viruses from cash has increased.”
Given the quantitative reduction measures used worldwide to boost economies in crisis, the report’s assertion that “the role of central banks remains important, if not more, today is particularly relevant”. .
Libra, China and worldwide competition
Facebook’s Libra is developing into a great opportunity this round. The stable coin fell into the hands of regulators immediately after the publication of the white paper, a relationship that the Libra Association has had difficulty repairing in recent months.
During a press conference, Benoît Coeuré, BIS economic advisor, confirmed that “the Libra, as we usually say, was the wake-up call of the global community”.
However, Coeuré denied seeing evidence of what some call an arms race for a CBDC, especially between China and the United States.
“I don’t think there really is a race,” said Coeuré. “In this phase, we just want to learn what others are doing.”
Hyun Song Shin, head of the BIS innovation center, also emphasized the use of capacity development centers domestically and not internationally:
“The primary concern is the security and efficiency of national payments, as well as financial inclusion. […] I think the international dimension has a lot of coverage, but right now it is different from what we know in terms of design features and actual use. “
Blockchain and CBDCs
As many have emphasized, a CBDC does not necessarily depend on blockchain technology. However, the concerns raised in the BIS report illustrate an example of long-term use. That means how important it is to be able to replicate some of the best components of cash:
“Technically speaking, a successful retail CBDC should provide a robust and comprehensive digital plug-in for physical money. Therefore, a CBDC must have all the functions and more that make cash so attractive. The core elements are trust in the issuing body, Legal tender status, real-time strength guarantee, and wide availability. “
Benoît Coeuré confirmed to Cointelegraph that distributed accounting technology was on the table, but was not sure what that meant, and said: “This is exactly part of the discussion we need to have to find technical solutions.” In addition, the distinction between legal data protection, which plays a prominent role in the report, and data protection, which is imposed by technological capabilities, was avoided, which is not the case.