Midst growing debate over the future of money, major central banks across the globe are looking at a possibility of issuing their own digital currencies, said the European Central Bank and the Bank of England.
“The central banks of Britain, the euro zone, Japan, Sweden and Switzerland will share experiences in a new group headed by former European Central Bank official Benoit Coeure and assisted by the Bank of International Settlements”, they said in a statement..
In the wake of Facebook’s initiative to launch its own cryptocurrency Libra, central banks across the globe have increased their efforts and are looking at the possibility of issuing their own digital currencies.
Although China has emerged as the frontrunner in these efforts, details of its project are still scarce.
“The group will assess … economic, functional and technical design choices, including cross-border interoperability; and the sharing of knowledge on emerging technologies,” said the central banks in a statement.
While CBDCs are digitsed traditional money issued and governed by a country’s central bank, in contrast cryptocurrencies, such as bitcoin, are governed by disparate online communities and do not have a central governing body.
The common denominator in both, CBDCs and in cryptocurrencies is that, both are based on blockchain technology, a digital ledger that allows transactions to be recorded and accessed in real time by multiple parties.
In 2019, Mark Carney, Bank of England’s Governor took aim at the U.S. dollar’s “destabilizing” role in the world economy and said, central banks might need to join forces to create their own replacement reserve currency.
“The best solution would be a diversified multi-polar financial system, something that could be provided by technology”, said Carney.
He went on to add, while Facebook’s Libra was the most high-profile proposed digital currency to date, it faces a host of fundamental issues that it has yet to address.