March 28, 2024

BIS defines requirements for digital currencies of central banks

BIS defines requirements for digital currencies of central banks

Seven central banks and the Bank for International Settlements (BIS) published a report on digital currencies on October 9.The 26-page report outlines the “fundamentals and characteristics” of central bank digital currencies (CBDCs).

The report was compiled by the Bank of Canada, Bank of England, Bank of Japan, European Central Bank, US Federal Reserve, Riksbank (Central Bank of Sweden), Swiss National Bank and BIS.

According to the report, the use of cashdeclined, while the popularity of digital payments is “growing rapidly”. Central banks and BIS believe that CBDC can become an "important tool" in the activities of central banks "in view of the increasingly digitalization of the economy."

"Technology is changing payment methods and central banks have a responsibility to protect people's trust in our money."“said Christine Lagarde, President of the European Central Bank.

“Central banks should work closely together tothe issue of studying digital currencies to determine the basic principles and encourage innovation. This report is compelling evidence of this international collaboration. "

The report highlights three principles that shouldBanks should be guided when launching a CBDC: (i) the central bank should not jeopardize monetary or financial stability by issuing a CBDC; (ii) CBDC must coexist with and complement other forms of money; (iii) CBDC should promote innovation and payment efficiency.

As for the main characteristics of CBDC, they areshould be easily convertible, accessible (support offline transactions), easy to use, and with very low (or zero) payment fees.

"The report of this group of central banks is a real step towards agreeing on the general principles and characteristics that we believe will be required for a workable CBDC system."Said John Cunliffe, Chairman of the BIS Payments Committee and Deputy Governor of the Bank of England.

"This group of central banks has reached a strong international consensus, as each of us has previously researched CBDCs in our jurisdictions."

BIS defines requirements for digital currencies of central banks

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