Six central banks, including the Bank of England, will investigate whether there is a strong case for creating a central bank digital currency in their respective countries.
Deputy governor of the Bank of England Jon Cunliffe will co-chair the group, along with Benoit Coeure, who runs the Bank of International Settlements’ Innovation Hub, which is also getting involved.
The Bank of England said the new working group will look at ‘CBDC use cases; economic, functional and technical design choices, including cross-border interoperability; and the sharing of knowledge on emerging technologies.’
Deputy Governor of the Bank of England Jon Cunliffe will co-chair the working group
It will also work closely with other global forums and groups, such as the Financial Stability Board and the Committee on Payments and Market Infrastructures (CPMI), which is also chaired by Mr Cunliffe.
It comes amid the increasing popularity of digital currencies, such as Bitcoin, Ethereum, Litecoin, Monero, Dash and others.
Facebook’s plans for its Libra coin and a digital wallet have caught the attention of regulators and central banks worldwide, with the Bank of England ltc electrum among those vowing tough new rules.
The Bank of England has enthusiastically extolled the benefits of CBDCs. It produced a report in 2016 arguing that introducing a CBDC in the UK would add .
The other five central banks in the group include the Bank of Canada, the European Central Bank, the Swiss National Bank, the Bank of Japan and the Swedish central bank, the Sveriges Riksbank.
Proponents of CBDCs believe they would improve financial inclusion, bank safety and be more technologically efficient.
Bitcoin is probably the most well-known virtual currency in the world
A report from Ben Dyson and Graham Hodgson of non-profit group Positive Money in 2016 also said they would that banks or politicians could use to stimulate growth in the economy.
They wrote: ‘If digital cash is used to completely replace physical cash, this could allow interest rates to be lowered below the zero lower bound (although this is not a policy we would advocate).
‘Alternatively, digital cash can be used as a tool to increase aggregate demand by making ‘helicopter drops’ of newly created digital cash to all citizens, making it easier to meet the Bank of England’s monetary policy target of price stability.’
Sweden’s Riksbank announced last month that it would a create a pilot digital currency, known as the e-krona, with consultancy firm Accenture.
The bank has said the decline in cash transactions in Sweden was a major motivation behind the need to experiment with a digital currency, as a means to ‘promote a safe and efficient payment system.’
The European Central Bank has also already been investigating the possible benefits of CBDC since last year.
Central banks have been concerned over the launch of private sector crypto currencies, given their potential to become so-called systemically important payment systems.