On 21 January 2020, the Bank of England, Bank of Canada, Bank of Japan, European Central Bank, Sveriges Riksbank and Swiss National Bank, together with the Bank for International Settlements (BIS), announced the creation of a group which will share experiences in assessing the potential cases for Central Bank Digital Currency (CBDC) in their home jurisdictions.
The group will seek to assess CBDC use cases going forward – including “economic, functional and technical design choices, cross-border interoperability and the sharing of knowledge on emerging technologies”. It also announced its intention to work closely with relevant institutions like the Financial Stability Board and BIS’ Committee on Payments and Market Infrastructures (CPMI).
The group will be co-chaired by Benoit Coeure, head of the BIS Innovation Hub, and Jon Cunliffe, deputy governor of the Bank of England and chair of the CPMI under the BIS.
Two central banks in the group, the European Central Bank and Sveriges Riksbank are already developing their own sovereign digital currencies, while several others have been researching CBDCs for some time. Despite these developments, some participants have in the past expressed concern around the growth of digital currency, with Coeure in particular referring to Bitcoin as “the evil spawn of the financial crisis” in 2018.
That said, the establishment of the group shows the increased seriousness with which central banks are treating the emergence of digital currency as an asset class, as well as the increased potential for sovereign states to issue their own CBDC going forward. Initiatives in this area have accelerated since the formal announcement of Libra in June 2019 and have led some, most notably former Bank of England Governor Mark Carney, to speculate that a form of CBDC could ultimately usurp the role of the US dollar as a global reserve currency.