Central banks consider launching digital currencies

BoE and ECB among five banks considering a blockchain-based answer to cryptocurrencies

                                

Central banks in the UK, EU, Japan, Sweden and Switzerland are considering issuing their own digital currencies.

The five major banks will share their experiences in a group headed by former European Central Bank board member Benoît Coeuré and assisted by the Bank of International Settlements, they said.

“The group will assess ... economic, functional and technical design choices, including cross-border interoperability; and the sharing of knowledge on emerging technologies,” the central banks said in a statement.

To some extent the banks’ hands have been forced as Facebook pushes to launch its Libra cryptocurrency.

Other central banks have also stolen a march on the five. China’s central bank – The People’s Bank of China – revealed this month that the “top-level” design of its digital currency has been completed.

Canada is also looking at launching a digital currency. Late last year US central bankers explored the possibility of developing a digital currency directly available to businesses and households.

Central bank digital currencies are traditional money but in a digital form, rather than cryptocurrencies. They are seen as a way for central banks to keep a degree of centralised control over money supply in the face of the growing use of crypto coins.

Both, though, are based on blockchain technology that allows transactions to be recorded and accessed in real time.

The need for more dominant global currencies came to light last year when outgoing BoE Governor Mark Carney was critical of the US dollar’s “destabilising” role in the world economy. He said central banks might need to join together to create their own replacement reserve currency.

FURTHER READING: Facebook Libra, Explained

FURTHER READING: Canadian central bank exploring digital currency

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