The digital currencies of the central banks in the countries have achieved the full support of the largest monetary body in the world; the Bank for International Settlements (BIS), chaired by the Mexican Agustín Carstens.
The central bank of central banks argued that central bank digital currencies (CBDCs) are necessary to modernize finances and ensure that large technology companies do not control those assets.
The world body is coordinating many of its discussions on digital currencies; set out recommendations on Wednesday on what a dollar, euro, yen or yuan CBDC should look like in the cryptocurrency version.
As part of its next annual report, it estimated that at least 56 central banks and monetary authorities, representing around a fifth of the world’s population, are now considering digital currencies as commerce shifts to online business.
“The train has left the station,” said Benoit Coeure of the BIS, referring to the move towards digital currencies from central banks and their support. “It’s not that we are getting carried away, we are just observing the scenery around us.”
The momentum comes as the use of physical cash falls globally and authorities seek to fend off the “threat” to money printing capacity posed by assets like bitcoin and the efforts of big tech like Facebook, which launched cryptocurrency Diem, formerly known as Libra.
Without CBDCs, digital money would be increasingly dominated by big tech companies, Coeure warned, as they would take advantage of huge social media user bases.
“That’s a place where you don’t want to be, where governments don’t want to be,” said Coeure, describing it as a loss of control of sovereign money.
Some countries have already come a long way. The Bahamas became the first to launch a general-purpose CBDC, known as the Sand Dollar, in October. China has several ongoing trials and Switzerland and the Bank of France have announced Europe’s first cross-border experiment.
Hyun Song Shin, another senior BIS executive, said authorities will have to decide whether citizens need digital IDs to use CBDC or follow a token-based route that many cryptocurrencies use to keep transactions more anonymous.
In the BIS’s view, the identification system would be the “best way forward,” Shin and Coeure said. One of the reasons is that it would prevent people from using digital currencies from countries other than their own, such as the dollar, which is often considered a safe haven asset.
Most experts believe there is still at least two years to go before digital dollars or euros are fully operational, but setting global rules around CBDCs is highly political and one that is taking shape.
“The new trade wars are wars of technology,” Coeure said, emphasizing that CBDCs should not be part of that battle.
With information from Reuters.
