Exploring the future of CBDC: Insights from BIS and central banks

Exploring the future of CBDC: Insights from BIS and central banks

Recently, the Bank of International Settlement (BIS) along with a group of central banks has unveiled a report related to the current situation of central bank digital currency and its plans. For those who are not aware, the group of central banks and the Bank of International Settlement exploring the CBDC for the general purpose. 

On May 25, the BIS published its third report related to CBDC which initially started in October 2020 where common foundational principles and core features of a CBDC were mentioned. In the third and recent report, they have summarized all previous reports in which issues like financial stability and implications of CBDC in the current financial sector were mentioned. The BIS and a group of central banks look at central bank digital currency in a very optimistic way. According to the report, many central banks are currently looking to create a user-friendly CBDC and free from any risks. The motivation for introducing a retail CBDC may rest primarily on the role of central bank money as a public good. 

Reportedly, the BIS has clarified that there’s no intention to impose any kind of CBDC on any central bank as they are sovereign to choose what will be beneficial for them. Additionally, it also said that some of the members of the group have decided to halt the CBDC adoption or not move to the next stage. The decision to implement the CBDC will be completely vested in the central banks or related authorities because it requires deeper investigations and end-user experiences. Careful consideration and interaction with a wide range of stakeholders, including the private sector and legislators, are necessary for the development of CBDC activities. Also, private innovation is seen as a crucial factor for the long-term sustainability of any CBDC. 

The central bank’s digital currency is very dynamic, and lawmakers and authorities need to constantly work on the improvement and development of the CBDC. On the question of how the central bank can utilize the expertise of various stakeholders, the BIS has pointed out some suggestions. For the betterment of CBDCs, central banks need to form stakeholder forums where people can share their experiences and expectations of the technology. Additionally, surveys on payment behavior, CBDC-dedicated technologies, and case studies can be very beneficial for central banks.

Countries worldwide have different types of rules and regulations, some are managing central bank digital currency under traditional laws. A CBDC’s adoption may also be influenced by its legal structure. For instance, giving CBDC legal cash status would increase public acceptance and trust but would probably necessitate a legislative change in most jurisdictions.

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