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Central banks to discuss digital currency development

By Lawrence Gash

EU, UK, Sweden, Switzerland, Japan and Canada plan April meeting

Six major central banks will meet in the spring to discuss the future of central bank digital currencies (CBDC). This signals growing acceptance of digital asset technology first pioneered by cryptocurrencies such as Bitcoin (BTC).

According to The Japan Times, the meeting will take place on the sidelines of April’s International Monetary Fund conference in Washington. It will include representatives from the European Central Bank, Bank of Japan, Bank of England, Bank of Canada, Sweden’s Riksbank and the Swiss National Bank.

The central bankers will discuss the difficulties of cross-currency settlements, the need to defend against sophisticated cyber attacks as well as the introduction of digital currencies.

CBDCs are a controversial subject among central bankers. Towards the end of 2019 Haruhiko Kuroda, the governor of the BoJ, observed in a speech to an international symposium that “it does not seem that there is a demand for CBDC from the public at present”.

However, central banks have rushed to develop digital currency technology following the announcement of the Facebook-led Libra Association and its proposed global stablecoin.

Only last month, when the aforementioned six countries agreed to share CBDC research findings, Hiromi Yamaoka, a former head of the BoJ’s division overseeing payment and settlement systems, admitted: “The latest decision (by the six central banks) is not just about sharing information. It’s also an effort to keep something like Libra in check.”

While the threat of Libra has receded in recent months, with prominent members such as PayPal and Mastercard pulling out, its initial announcement jolted central banks into action. A system of easy cross-border payments potentially available to Facebook’s 2 billion users threatened central bank authority and power. Haruhiko Kuroda admitted as much, stating last year that global stablecoins “undermine the effects of monetary policy transmission and financial system stability”.

While some may welcome the growing interest central bankers show in keeping up to date with the latest technological developments, another line of argument could be less enthusiastic. Part of the popularity of cryptocurrencies was that they provided a decentralised and private alternative to central bank control.

With central banks now taking a closer interest in the technology pioneered by the likes of Bitcoin and Ethereum, such hopes of liberation and privacy could well recede.

An internal presentation given last year to the governor and board of directors of the Bank of Canada argued that personal details gleaned from those using a digital version of the Canadian dollar “could be shared with police or tax authorities”.

FURTHER READING: Libra pushed central banks towards digital currency, says ex-BoJ chief

FURTHER READING: Canadian central bank exploring digital currency

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