The Bank of International Settlements Reaffirms its Support on CBDCs
A new report released by the BIS indicates that it supports Central Bank Digital Currencies, terming CBDCs as a distinct representation of money for the digital market. Commonly known as the bank of central banks, BIS acknowledges that CBDCs introduce several solutions ranging from transparency, settlement finality, and liquidity.
The commerce industry is gradually moving to the internet, making it necessary to implement CBDCs for global retail payments and the public good. Therefore, going to the report, approximately 56 central banks and monetary authorities are closely investigating the possibilities of digital currencies.
Further explorations and suggestions into how CBDCs such as the digital euro or dollar should look like are already underway. Several regions, such as the Bahamas, are already on board with the CBDC concept as it launched its Sand Dollar in October 2020. The Bank of France and Switzerland also moved to announce Europe’s first cross-border pilot program.
More on the Report
Based on the proposed CBDC idea, BIS states that the overall architecture will accommodate central banks and the private sector- each playing specific roles. The framework means that while commercial banks will cater to consumer-facing activities and operational tasks, central banks will focus more on the overall functionality of the primary system.
Digital currencies employ privacy features which, in most cases, leads to numerous financial crimes and other illegal dealings. As such, the report by BIS addresses the privacy and anonymity subject by suggesting the use of robust customer identification protocols.
Through account-based CBDCs, digital identity platforms will verify identities and employ user data protection mechanisms. Additionally, since user data is prone to cyber-related attacks, the report guarantees that a vast cybersecurity plan will be set up on any CBDC asset.
BIS Pivotal Role on CBDCs
For a long time, the Bank of International Settlements has been vocal about the implementation of CBDCs. As a result, the global financial body initiated a work program dubbed the BIS Innovation Hub (BISIH), which seeks to experiment on cheaper cross-border payments using CBDCs.
BIS started the program across different regions such as Hong Kong and Singapore and is scheduled to continue throughout 2021. According to the program, BISIH would also look into distributed ledgers applicable when issuing tokenized green bonds to investors.
A representative of the BIS, Benoit Coeure, explains that the presence of CBDCs could eliminate prominent tech companies from controlling the digital money ecosystem. Instead, according to him, big tech firms could use their large social media user bases to encourage uncontrolled and unregulated sovereign money.