Together with the Bank for International Settlements (BIS), seven central banks published a report today. It outlines the basic principles necessary for publicly available CBDCs to help central banks meet their public policy objectives.
Central banks have provided the public with a reliable means of framework public policy objectives for hundreds of years. But the world is changing. To develop and pursue their political goals in the digital world, central banks are actively investigating the advantages and disadvantages of offering digital currencies to the public.
CBDC’s Foundational Principles and Core Features
The report was prepared by the Bank of Canada, Bank of England, Bank of Japan, Bank of Europe, Central Bank, Federal Reserve, Sveriges Riksbank, Swiss National Bank, and BIS. It highlights three key principles for a CBDC: coexist with money, support broader political goals, and encourage innovation and efficiency.
The central bank group will continue to work together on the CBDC without prejudice to decide whether to introduce CBDC in their jurisdiction or not. Sir John Cunliffe, Deputy Governor and Deputy Chair of the Working Group, said that the report is a real step forward for this group of central banks to agree on general principles and identify the key features we believe are necessary for a functioning CBDC system.
The report supports it. It helps the banks achieve their policy goals and provides a useful framework for how central banks provide money and maintain payment systems in an evolving digital world. This group of central banks has built a strong international consensus that will shed light on how we each investigate the case and draft for CBDC in our jurisdiction, he said.
The document explains that the essential components of a stable CBDC include convertibility, convenience, security, speed, scalability, legal stability, and various other categories. Benoit Cornet, Co-Chair of the Working Group, Head of the BIS Innovation Center, stated that designs that provide this capability could drive more sustainable, efficient, comprehensive and innovative payments. The report provides a springboard for further CBDC development as there is no one CBDC, same as others due to national priorities and circumstances.
Future Developments to CBDCs by Central Banks
CBDC development requires a commitment to practical policy analysis and the application of technical experimentation. Even though this has already started, the pace of innovation in payments and money-related technologies requires that collaboration be a priority.
Future activities will include exploring other open issues around CBDC and cross-border payment challenges and continuing relationships within the country and with other central banks to foster informed dialogue on key issues. The BIS Innovation Hub’s work, serving the wider central banking community, will contribute to this goal.