Bank for International Settlements warn Central Banks on Issuing Digital Currencies

Doris Richards
March 14, 2018

To address this failing, central banks must improve worldwide payment channels and rise to the challenge bitcoin is presenting fiat currencies, the opinion piece asserts. "The policy issues that this would raise, for central banks and society more generally, need careful consideration".

The report noted that any virtual currency would have to comply with requirements aimed at stopping money laundering and financing of terrorism.

The report doesn't dismiss the idea.

A report written by Klaus Löber, who is a Senior Advisor at the European Central Bank (ECB) and Aerdt Houben, who is the Director of the Financial Stability Division at De Nederlandsche Bank (DNB), details the negative impact it could have on the economy.

In its inaugural report on central bank digital currencies, the BIS's Committee on Payments and Market Infrastructures (CPMI) and Markets Committee analyse the potential impact of CBDCs on various sectors of the financial system.

It could move central banks into uncharted territory and could also lead to greater political interference.

The BIS concluded that wholesale digital currencies and their underlying technologies have the potential to make settlement of securities and derivatives transactions more efficient, even though proposals so far look broadly similar and not clearly superior to those in place.

There was no evidence that digital currencies would allow central banks to implement monetary policy better than with tools they already have. Coeure is also a member of the executive board at the European Central Bank, the central bank for the 19-country eurozone and the issuer of the euro currency. Now such transactions use a massive and complex web of critical infrastructure - much of it based in London - which could in theory become defunct (or at least see major reductions) if the need for a trusted middleman is removed.

As Bitcoin and its peers threaten to invade central bankers' home turf, national authorities are probing new ways of making payments, and the topic of regulation is on the agenda of Group of 20 finance chiefs who will meet next week in Buenos Aires.

The world's top central banking body has said that the creation of crypto-currencies, such as bitcoin, by central banks could revolutionise the global financial system.

More than 1,200 years after the first paper banknotes appeared in China, the use of physical cash is in demise in various countries as digital transactions surge.

Sweden's Riksbank is hoping to offer its e-Krona and the Bank of England has a cryptocurrency unit to help it along its virtual currency journey.

Cryptocurrencies have entered the consciousness of central banks in recent years as they increase in popularity.

Although this report was released at a time where cryptocurrencies such as Bitcoin have huge volatility, this has not affected the price swings.

Other reports by Iphone Fresh

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