Key message: the Bank for International Settlements (BIS) has fully supported the development of central bank digital currencies (CBDCs), saying they are essential for modernising finance and ensuring that “big technology” does not take control of money.
BIS and CBDCs
Central bank digital currencies, or CBDCs, are fully digitized forms of their fiat counterparts. Led by China and its digital yuan, other countries have gradually joined in the development and exploration of CBDCs. Nowadays, we hear from many quarters that pilot tests are underway and deployment is imminent. However, it should be pointed out that this system is also centralised and has a single issuer – the central bank. This means that the bank will be able to keep track of every coin from its inception to its current ‘life’.
The BIS is referred to as the central bank for the world’s central banks. It coordinates many discussions about digital currencies and on Wednesday set out recommendations for what CBDC should look like. As part of its annual report, it estimates that at least 56 central banks and monetary authorities are now dealing with digital currencies. The truth is that this push comes at a time when people are stopping using cash and authorities are struggling to compete with “big technology” such as Bitcoin, or stablecoins.