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By Arghyadeep Dutta, 12:00 pm ET:
The Bank of International Settlements (BIS) on Friday urged major central banks to step up their efforts in developing their own digital currencies to avoid falling behind comparable private-sector payment initiatives that are already taking root.
Although most of the central banks has stepped up their efforts since early 2021 to develop Central Bank Digital Currencies (CBDCs), they’re competing with cryptocurrencies like Bitcoin and Ether, as well as stablecoins like USDC, which are pegged to the likes of the dollar.
Benoit Coeure, the head of the BIS Innovation Hub, said CBDCs should be easy to use, low cost, convertible, support instant settlements, be continuously available and provide a high degree of security, resilience, flexibility and safety.
“The time has passed for central banks to get going. We should roll up our sleeves and accelerate our work on the nitty-gritty of CBDC design. CBDCs will take years to be rolled out, while stablecoins and crypto-assets are already here. This makes it even more urgent to start,” Coeure said in a speech at the Eurofi Financial Forum in Ljubljana.
Also, large tech corporations are moving into digital payments scenario, including Facebook with its diem stablecoin, to which central banks are falling behind at a time when questions are even being asked about the future of fiat currency.
Though central banks in the U.S., Europe, U.K. have been considering establishing CBDCs, only the People’s Bank of China has launched trails for digital Yuan.
“Banks are worried about the implications of CBDCs for customer deposits. Central banks are mindful of these concerns and are working on answers. They see banks as part of future CBDC systems,” Coeure said.
“But make no mistake: global stablecoins, DeFi platforms and big tech firms will challenge banks’ models regardless,” he said.
“A CBDC’s goal is ultimately to preserve the best elements of our current systems while still allowing a safe space for tomorrow’s innovation. To do so, central banks have to act while the current system is still in place - and to act now,” Coeure said.
(With inputs from Reuters and Business Insider)
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