The Bank for International Settlements (BIS) announced its full support for the development of central bank digital currencies (CBDC) in the pursuit of financial and monetary stability through international cooperation with the mandate and support of central banks. .
CBDCs are crucial to modernizing finances
The BIS recognized that CBDCs must modernize finances and keep ‘Big Tech’ in check so as not to control money.
Benoit Coeure, a member of the BIS, warned:
“Without CBDCs, digital money would be increasingly dominated by big tech companies as they take advantage of huge social media user bases.”
CBDCs are digital assets tied to a real-world asset and backed by central banks, which means that they represent a claim against the bank exactly how the notes work. Furthermore, they are blockchain-enabled, representing a new technology for issuing central bank money at the wholesale and retail level.
According to the announcement:
“As part of its next annual report, it estimated that at least 56 central banks and monetary authorities, representing around a fifth of the world’s population, are now considering digital currencies as commerce changes online.”
The CBDC issuance appears to be a race against time; Many nations believe that owning a CBDC is critical to being in control of global markets.
The Bahamas: the first nation to launch a CBDC
The Bahamas launched the Sand Dollar in October last year, making it the first country in the world to officially launch a CBDC beyond the testing phase.
As more nations reveal their interest in CBDCs, the BIS noted that authorities would have to decide whether citizens require digital IDs to use them or choose the token-based route, making transactions more anonymous.
In November 2020, the International Monetary Fund (IMF) advised central banks not to overlook some essential legal frameworks necessary for a CBDC to function.
Once implemented, CBDCs are expected to drive financial inclusion for nearly 1.7 billion people excluded from the banking system.
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