The Bank for International Settlements (BIS), the International Monetary Fund (IMF), and the World Bank argue to the G20 that central bank-issued digital currencies (CBDC) will benefit worldwide development.
In a new joint report, they have proposed to create a cross-border network of central bank digital currencies (CBDC), underpinned by efficient technological integration and proactive international cooperation, which could be of significant benefit to the world economy. The report was prepared for a G20 meeting in Italy hosting the finance ministers and central bankers of the world’s largest economies.
The report calls for broadening the view beyond central banks’ individual studies of CBDCs for domestic needs and is emphasizing that global coordination between various national efforts is crucial to reap the full benefits of digital currency.
Such coordination on digital currencies would change the status quo with expensive and slow transfer services to send money worldwide.
“Faster, cheaper, more transparent, and more inclusive cross-border payment services would deliver benefits for citizens, businesses, and economies worldwide,” said Indermit Gill, World Bank Group vice president of equitable growth, finance, and institutions.
Around 90% of central banks worldwide are currently looking at creating digital versions of their own currencies, raising questions about how they will operate with each other.
“CBDCs (central bank digital currencies) offer the opportunity to start with a ‘clean slate.’ It is crucially important that central banks take the cross-border dimension into account,” said in a report Jon Cunliffe, Chair of the Committee on Payments and Market Infrastructures and Deputy Governor for Financial Stability of the Bank of England.
“The implications of CBDCs, even if only intended for domestic use, will go beyond borders,” added Tobias Adrian, Financial Counsellor and Director of the IMF’s Monetary and Capital Markets Department.
The report envisions a central bank digital currency ecosystem where currencies could be exchanged with one another instantly and at all times. In the same way that central banks offer swap lines to one another (to ensure, for example, that U.S. dollars are readily available for exchange), digital currencies could offer the same services to retail users.
The report said that facilitating international payments with CBDCs could be achieved through different degrees of integration and cooperation, ranging from basic compatibility with common standards to the establishment of international payment infrastructures.
Inter-operability will be crucial while multilateral collaboration was also needed on the potential macrofinancial consequences CBDCs could cause, it said.
As reported before, the Fed is planning on publishing a paper this summer on the possibility of issuing a digital dollar, after which the Fed will ask for input from the public and Congress. At the time as China’s central bank is already undergoing digital yuan pilot testing.