The Bank for International Settlements (BIS) and a consortium of central banks have released a paper outlining their ongoing policy perspectives on a retail central bank digital currency (rCBDC). This publication marks the fifth collaboration by the same authors.
In 2020, the central banks of Canada, the European Union, Japan, Sweden, Switzerland, England, and the United States, in conjunction with the BIS, jointly published a concise document establishing common principles and desired key features for an rCBDC. This was followed a year later by three reports focusing on specific questions about implementing an rCBDC.
The latest paper predominantly builds upon the previous discussions of policy elements. The first element examined is stakeholder engagement, which the paper concludes will require various mechanisms. Engaging with legislators is crucial, as the legal aspects related to CBDCs broadly fall under national jurisdiction.
Seven central banks and the BIS take forward their work on retail central bank digital currencies. A new report summarises ideas and perspectives on policy options and practical implementation issues https://t.co/Qppbwn7OrS#CBDC pic.twitter.com/lDZMUlRhUZ
— Bank for International Settlements (@BIS_org) May 25, 2023
The paper highlights seven key legal issues, including whether an rCBDC should be considered the legal equivalent of cash or a distinct form of currency. Privacy, a subject of controversy in current debates surrounding CBDCs, is also addressed.
Central banks possess the necessary expertise to issue CBDCs, as they already possess the capabilities to create and manage a sophisticated value chain for a widely accessible retail product, such as banknotes.
The involvement of the private sector in establishing a CBDC ecosystem is both a policy decision and a practical consideration, as public acceptance plays a pivotal role in the successful implementation of a CBDC. It is essential to understand this role in advance, as specific policy objectives may only be achieved when CBDC adoption reaches or surpasses a certain threshold. This, in turn, can influence the design, functionality, and use cases of a CBDC.
Crucial design considerations encompass facilitating interactions between retail and wholesale CBDCs and the cross-border interactions involving CBDCs. While blockchain technology is not deemed essential for a potential CBDC system, it also acknowledges that it may not always be the most cost-effective or efficient technology for all types of transactions. The advantages of programmability and the ease of processing micropayments provided by blockchain must be weighed against these factors.
It is worth noting that none of the central banks involved in the study currently have plans to introduce a CBDC.
