The Bank of International Settlements (BIS) has published a paper considering the rise of central bank digital currencies (CBDCs) and the impact of the Coronavirus crisis on their development.

Economists and analysts Raphael Auer, Giulio Cornelli and Jon Frost drew up a database of research and development work, assessed the policy stance based on a database of more than 16,000 central bank speeches, and provided a taxonomy of technical designs from all relevant policy and analytical publications published by central banks worldwide.

The paper specifically assessed three CBDC projects: China's Digital Currency Electronic Payments (DC/EP), Sweden's e-krona and the Bank of Canada's CBDC contingency plan.

In terms of the drivers for CBDC development, "we find that most projects originate in digitised and innovative economies", with retail CBDC work more advanced where the informal economy is larger.

Crucially, the BIS found that none of the projects surveyed seeks to replace cash - all aim to offer a digital complement.

More and more central banks are considering 'hybrid' or 'intermediated' technical architectures, where the CBDC is a cash-like direct claim on the central bank but the private sector manages all customer-facing activity.

Only a few jurisdictions are considering 'direct' designs, in which the central bank takes on some or all of the customer-facing side of payments. At present, no central bank reports that it is pursuing a more 'synthetic' or 'indirect' CBDC design.

Current proofs-of-concept tend to be based on distributed ledger technology rather than a conventional infrastructure. Access frameworks tend to be based on account identification rather than allowing for token-based anonymity.

The motivations for issuance vary across countries, as do the policy approaches and technical designs, according to the paper.

"Going forward, events such as the COVID-19 pandemic highlight the value of access to diverse means of payments, and the need for any payment method to be both inclusive and resilient against a broad range of threats, just as cash is," the BIS concluded.

Early last year, BIS research showed that around 70 per cent of central banks are researching the potential of issuing CBDCs to complement or replace traditional money.

Since then, the Bank of England, Bank of Canada, Bank of Japan, European Central Bank, Sveriges Riksbank and Swiss National Bank have created a group to share experiences as they assess the potential cases for CBDCs.

And in July, Banque de France announced its chosen candidates for the integration of a CBDC for interbank settlements: Accenture, Euroclear, HSBC, Iznes, LiquidShare, ProsperUS, SEBA Bank and Société Générale.

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