LONDON — Top financial institutions call for global cooperation on central bank digital currencies.
The Bank for International Settlements, the global body for central banks, released a report Friday stating that central banks need to work on “interoperability” between their digital currency projects.
This can be achieved in several ways, the report said, such as creating common standards and setting up international payment infrastructures.
The report was produced in collaboration with the International Monetary Fund and the World Bank.
Several central banks are investigating digital currencies that would be issued by central banks to commercial banks or directly to the public. Their efforts have intensified over the past year amid a decline in cash use and a growing interest in cryptocurrencies such as bitcoin.
A photo illustration with a gold chain, silver coins and visual representations of bitcoin on top of different currencies.
Yuriko Nakao | Getty Images
The People’s Bank of China is leading the way, with real-world trials already taking place in several cities.
“I think every central bank, every country should have its own sovereign currency,” Agustín Carstens, general manager of the Bank for International Settlements, or BIS, told CNBC’s Annette Weisbach on Friday.
“Since virtually all central banks are thinking about this, it is a unique opportunity for the various central bank digital currencies to be interoperable,” said Carstens, adding that global central banks must ensure that their systems are “congruent with each other.” and that “transactions in different currencies can be done in a seamless way.”
The BIS is an umbrella group for central banks, representing institutions from the US Federal Reserve to the People’s Bank of China. The report with the IMF and World Bank said that central bank digital currencies, or CBDCs, would enable cheaper and faster cross-border payments.
Right now, “payment from, say, Mexico to the US, can take days,” Carstens said. “Sometimes the commissions you pay are 7%. That’s ridiculous.”
“What we need to do is take advantage of the fact that virtually everyone is starting with a clean slate so that we can incorporate the interconnectedness between the different systems from the ground up.”
However, the BIS report highlighted a number of outstanding issues with CBDCs that have yet to be ironed out, such as the role of “private industry” actors.
Diem, a digital currency proposed by Facebook, was widely condemned by regulators when it was first launched in 2019.
Meanwhile, so-called stablecoins like tether — which are often backed by sovereign currencies like the dollar — have come under increasing criticism from economists and regulators for a perceived lack of transparency.