Central Banks get together to discuss CBDCs

Karthik Subramanian

Eight Central Banks from around the world, have got together to discuss building a consensus surrounding the central bank digital currencies which have been dominating the monetary policy meeting of many countries over the last few months.

The Bank of Canada, BOE, BIS, ECB, Bank of Japan, Swiss National Bank, Sveriges Riksbank, and Federal Reserve were the participants in the consensus meeting post which they released a series of reports on the policies and strategies behind CBDCs, how they can be implemented, how they can be regulated and monitored as well as what kind of impact that they are likely to have on the financial ecosystem. This follows the news from yesterday where it was reported that the BOE was in consultation with a couple of working bodies in the Technology Forum and Engagement Forum regarding CBDCs.

Benoît Cœuré, head of the BIS Innovation Hub and working group co-chair, said: “CBDCs can foster innovation and preserve the best elements of the current system as it evolves. This group is helping central banks to answer difficult and practical questions about how to offer safe and neutral currency with interoperable systems that harness new technology and serve the public.”

Though none of these banks have given any indication that they would be introducing CBDCs anytime soon, it is important to study their interoperability if and when they do launch it as it would need a coordinated effort. Though there are some countries like Nigeria that have gone ahead with the introduction of CBDCs, it would still require the users to convert them back into fiat for payments made across borders as the current payment systems across the world do not fully support digital currencies. This is likely to make users reluctant to use CBDCs in the long run and so it becomes important that different countries cooperate to get this up and running, if they do plan to do so, rather than trying to go it alone.

It also needs to be made sure that they study the impact on the existing financial ecosystem and this study has been issued in one of the reports given outpost the meeting. The reports also included how the CBDCs would best help the people and businesses along with a study of the impact from similar such innovations earlier.

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