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), have created a group to share experiences as they assess the potential cases for central bank digital currency (CBDC) in their home jurisdictions.

The group will assess CBDC use cases; economic, functional and technical design choices, including cross-border interoperability; and the sharing of knowledge on emerging technologies.

It will closely coordinate with the relevant institutions and forums – in particular, the Financial Stability Board and the Committee on Payments and Market Infrastructures (CPMI).

The group will be co-chaired by Benoît Cœuré, head of the BIS Innovation Hub, and Jon Cunliffe, deputy governor of the BoE and chair of the CPMI. It will also include senior representatives of the participating institutions.

The conversation about CBDCs really began in May 2018, when the BoE claimed to have made a “material step forward” in addressing one of the major risks preventing central banks issuing their own digital currencies.

Analysis from Michael Kumhof, a senior research advisor in the BoE’s research hub, and Claire Noone, who works in the bank note operations division, was followed by an official blog post which was at pains to state that the central bank was not planning to create its own digital currency.

The following month, the European Parliament’s Economic and Monetary Affairs Committee stated that while cryptocurrencies should not supplant traditional currencies due to scalability limitation, CBDCs could create a more stable financial system.

By the end of that year, the head of the International Monetary Fund Christine Lagarde backed the moves, commenting: “I believe we should consider the possibility to issue digital currency… there may be a role for the state to supply money to the digital economy.”

She added: “The advantage is clear. Your payment would be immediate, safe, cheap and potentially semi-anonymous... and central banks would retain a sure footing in payments."

In early 2019, research from the BIS revealed that around 70 per cent of central banks are researching the potential of issuing a CBDC to complement or replace traditional money.

The Swiss institution for the 63 central banks worldwide said its survey showed that central banks are “proceeding with caution” towards the idea of centralised digital currency for general use - a opposed to wholesale use - but most institutions remain at a conceptual stage of development.

Share Story: