Seven central banks have issued a set of reports intended to build a global consensus for the design and development of a retail digital currency.
Building on an initial report outlining foundational principles for CBDCs published in 2020, the group formed by Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Federal Reserve, Sveriges Riksbank, Swiss National Bank and the Bank for International Settlements has now turned to practical policy and implementation issues.
While none of these central banks has yet decided to proceed with a retail CBDC, they believe continuing to work on the topic is key, due to its wide-ranging implications.
Benoît Cœuré, head of the BIS Innovation Hub and working group co-chair, says: "CBDCs can foster innovation and preserve the best elements of the current system as it evolves. This group is helping central banks to answer difficult and practical questions about how to offer safe and neutral currency with interoperable systems that harness new technology and serve the public."
The first report explores how private-public collaboration and interoperability can be designed into CBDC systems. In particular, policies about privacy and access to payment data would be key design elements in order to maintain public trust, the group concludes.
The second report focuses on how a CBDC could best serve people and businesses in a fast-changing technological landscape. Lessons from previous payment innovations compiled in the report, show that success often requires harnessing network effects and not requiring users to obtain new devices.
The third report outlines the possible impact of CBDC issuance on banking systems, in terms of intermediation capacity and overall resilience. Preliminary analysis highlights the importance of allowing the financial system time to adjust and the flexibility to use safeguards to influence CBDC adoption.
Sir Jon Cunliffe, Bank of England deputy governor for financial stability and working group co-chair, comments: "This collaborative input from a group of central banks will help make sure that innovation in an increasingly digital world, the role the private sector plays in any CBDC system to help it meet future payments needs, and how the financial system might evolve are carefully evaluated. These reports make sure these issues are at the centre of the debate on CBDCs."
The publication of the reports come a day after the Bank of England announced the membership of the central bank digital currency (CBDC) Engagement and Technology Forums. The membership is wide-ranging, and includes representatives from major banks, neo-banks, cards and payment schemes, retailers, and consumer advice agencies.
The Technology Forum met for the first time in late September, while the Engagement Forum will have its inaugural meeting later in the year.