BIS Prioritizes Exploring CBDC Feasibility In 2021 Annual Work Program
The Bank for International Settlements (BIS), also known as the central bank of central banks, has included exploring Central Bank Digital Currency (CBDC) feasibility as one of the six key areas set out in its annual work program for 2021.
The other five key focus areas set out by the BIS Innovation Hub (BISIH) are suptech and regtech, next-generation financial market infrastructures, open finance, green finance, and cyber security.
The BIS also launched the BIS Innovation Network, which is a network of experts drawn from the BIS’s 63 member central banks. This network is part of BIS’ plan to foster international collaboration among central banks on innovative financial technology.
The BISIH has already launched a new project to develop a proof of concept (PoC) platform using multiple wholesale CBDCs to explore the feasibility of faster and cheaper cross-border payments. It will also work on a technological research project and associated prototype(s) for tiered retail CBDC distribution architectures.
The initiatives will be driven by the first three BIS Innovation Hub Centers in Hong Kong, Singapore and Switzerland which have been established in conjunction with their partner central banks: the Hong Kong Monetary Authority, the Monetary Authority of Singapore and the Swiss National Bank.
Other initiatives will be undertaken by the planned new Hub Centers across Europe and North America when they begin operations in the coming months, as well as a Strategic Partnership with the Federal Reserve Bank of New York.
CBDCs are slated to be the digital equivalent in value to a nation’s paper currency and are subject to the same government-backed guarantees. In addition to printing money, central banks can issue CBDCs as a digital representation of a country’s fiat currency. CBDCs are expected to be used for interbank settlements.
While the global economy races to embrace digital payments, central banks also are looking to investigate and support innovation while maintaining monetary policy and financial stability as they issue and distribute currency.
According to a recent survey by BIS, about 80 percent of central banks surveyed are engaged in some form of work to develop CBDCs, and about 40 percent of central banks have progressed from conceptual research to experimenting with concept and design for CBDCs. Central banks representing a fifth of the world’s population say they are likely to issue the first CBDCs in the next few years.
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