Seven central banks and BIS publish report on digital currency, detailing how it should be designed

A group of seven central banks and the Bank for International Settlements (BIS) have published a comprehensive report on digital currency, detailing how it should be designed.

The 26-page report, published Friday, outlines “foundational principles and core features” of central bank digital currencies (CBDCs). The report has been compiled by seven central banks — by the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, Sveriges Riksbank, and the Swiss National Bank — and the BIS.

None of the central banks have reached a decision on whether or not to issue a CBDC, but they have outlined common principles and key features a CBDC would need "in order to contribute to central bank public policy objectives."

The use of cash in payments has declined and digital payments have grown “enormously," according to the report. Therefore, the central banks and the BIS believe that a CBDC could be "an important instrument" for central banks to continue to provide a safe means of payment in step with wider digitalization of lives.

"While technology is changing the way we pay, central banks have a duty to safeguard people's trust in our money," said Christine Lagarde, President of the European Central Bank. "Central banks must complement their domestic efforts with close cooperation to guide the exploration of central bank digital currencies to identify reliable principles and encourage innovation. The present report is a convincing proof of this international cooperation."

The report highlights three principles a CBDC should have: (i) a central bank should not compromise monetary or financial stability by issuing a CBDC; (ii) a CBDC would need to coexist with and complement existing forms of money; and (iii) a CBDC should promote innovation and efficiency.

As for core features of a CBDC, these include ease of use, low cost, convertibility, and continuous availability.
“This report is a real step forward for this group of central banks in agreeing the common principles and identifying the key features we believe would be needed for a workable CBDC system,” said Jon Cunliffe, chair of a BIS committee on payments and deputy governor of the Bank of England. “This group of central banks has built a strong international consensus which will help light the way as we each explore the case and design for CBDCs in our own jurisdictions."