LONDON – Major financial institutions call for global cooperation on central bank digital currencies.
The Bank for International Settlements, the global body of central banks, released a report on Friday saying central banks should strive to achieve “interoperability” between their digital currency projects.
This can be achieved in several ways, according to the report, such as creating common standards and building international payment infrastructures.
The report was written in collaboration with the International Monetary Fund and the World Bank.
Several central banks are exploring digital currencies that would be issued by central banks to commercial banks or directly to the public. Their efforts have intensified over the past year amid declining use of cash and growing interest in cryptocurrencies like bitcoin.
A photo illustration showing a gold necklace, silver coins and visual representations of bitcoins placed on top of different currencies.
Yuriko Nakao | Getty Images
The People’s Bank of China has led the way, with real-world trials already in place in several cities.
“I think every central bank, every country should have its own sovereign currency,” AgustÃn Carstens, chief executive of the Bank for International Settlements, or BIS, told CNBC’s Annette Weisbach on Friday.
âSince virtually every central bank thinks about it, this is a unique opportunity for the different central bank digital currencies to be interoperable,â Carstens said, adding that global central banks should make sure their systems are up to date. “congruent with each other” and that “transactions in different currencies can be carried out transparently.”
The BIS is an umbrella group for central banks, representing institutions from the US Federal Reserve to the People’s Bank of China. Its report with the IMF and the World Bank said central bank digital currencies, or CBDCs, could enable cheaper and faster cross-border payments.
Right now, “paying from, say, Mexico to the United States can take days,” Carstens said. “Sometimes the commissions you pay are 7%. That’s ridiculous.”
“What we need to do is take advantage of the fact that virtually everyone is starting from a clean slate, so that we can integrate from the outset the interconnection between the different systems.”
However, the BIS report highlighted a number of outstanding issues with CBDCs that still need to be resolved, such as the role of âprivate industryâ actors.
Diem, a digital currency offered by Facebook, was widely condemned by regulators when it was initially launched in 2019.
Meanwhile, so-called stablecoins like tether – which are often backed by sovereign currencies like the dollar – have drawn growing criticism from economists and regulators due to a perceived lack of transparency.