A group of seven central banks together with the Bank for International Settlements (BIS) have published a report laying out the key requirements for creation of a central bank digital currency.
The report, 'Central bank digital currencies: foundational principles and core features', was compiled by the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, Sveriges Riksbank, the Swiss National Bank and the BIS.
It highlights the key principles and core features of a CBDC, but does not give an opinion on whether to issue, although the race is clearly on to catch up with China's trailblazing exploits and beat off private initiatives such as facebook's Libra.
The document stresses that any introduction should support wider policy objectives and do no harm to monetary and financial stability. Coexistence with cash and other types of money is considered essential, as well as core features that promote innovation and efficiency.
"This report is a real step forward...in agreeing the common principles and identifying the key features we believe would be needed for a workable CBDC system," says Jon Cunliffe, 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."
While there will be no 'one size fits all' framework due to national priorities and circumstances, a workable CBDC should at a minimum, be:
- Resilient and secure to maintain operational integrity
- Convenient and available "at very low or no cost" to end users
- Underpinned by appropriate standards and a clear legal framework
- Have an appropriate role for the private sector, as well as promoting competition and innovation.
Benoît Cœuré, working group co-chair and Head of the BIS Innovation Hub, says: "A design that delivers these features can promote more resilient, efficient, inclusive and innovative payments. Our report provides a springboard for further development of workable CBDCs."