Central banks have identified key criteria for issuing their own digital currencies in a report from the Bank of International Settlements.
Digital money will have to co-exist with cash and other forms of tender, do no harm to monetary and financial stability, and be very cheap or free to use. There should also be an appropriate role for the private sector, according to a report by the BIS, the European Central Bank, the Federal Reserve and other institutions published on Friday.
“A design that delivers these features can promote more resilient, efficient, inclusive and innovative payments,” said working group co-chair Benoit Coeure, who leads the BIS’s Innovation Hub, set up last year to help officials embrace financial technology.
The paper, which provides a springboard for further development, comes less than a week after the ECB announced it would start public consultation and experimentation on digital currencies, a major step toward possibly creating a digital euro.
Just a few years ago, crypto-assets based on similar technology elicited condemnation from policy makers, with Coeure terming Bitcoin ‘the evil spawn of the financial crisis.’
But central banks are increasingly paying attention to and experimenting in the field after Facebook Inc. proposed creating its own electronic means of payment, Libra.
A survey of 66 central banks by the Basel-based BIS published early this year found that some 80 per cent were engaged in the matter, up from 70 per cent the year before. The proportion saying they were likely to issue a digital currency to the public in the next 1-3 years doubled to 10 per cent, it found.