IBS Journal: The iconic monthly FinTech magazine

February 2020 issue out now! Subscribe now

Launching India FinTech Report 2020

Market sizing and forecast of Digital Lending, Payments, WealthTech & RegTech. Subscribe now

Leading Back Office Systems for Banks

In-depth Supplier Profiles and User Lists. Subscribe now

In-depth Banking Tech and FinTech Research

Over 300 research reports that's updated quarterly. Subscribe now

Central banks assessing digital currency is ‘ironic’

Six central banks have formed a group to explore potential cases for central bank digital currencies (CBDC) in their home jurisdictions, in a move which has been called both ironic and progressive by the industry.

Don Guo, CEO of Broctagon, comments on digital currency

Don Guo, CEO of Broctagon

The Bank of England, the Bank of Canada, the Bank of Japan, the European Central Bank, Sveriges Riksbank and the Swiss National Bank, together with the Bank for International Settlements (BIS), created the group to share experiences and assess economic, functional and technical design choices, including cross-border interoperability.

Don Guo, CEO of Broctagon, the provider of multi-asset liquidity, brokerage and blockchain solutions, told IBS Intelligence that the move comes as no surprise.

“China has clearly lit a fire under these other nations, who are starting to recognise the inherent advantages of crypto. Countries who can correctly implement a CBDC will stand to benefit as they will have a currency which is totally borderless, efficient and immutable.

Guo said: “The irony of having a ‘centralised’ cryptocurrency seems to be lost on these state banks. The founding principal of crypto was decentralisation, so banks need to be careful that they don’t lose sight of the advantages that decentralisation can provide, otherwise there will be no real benefit of using the new currencies over fiat.”

Bradley Rice, Senior Associate at UK law firm Ashurst, added that China’s growth as a power nation has been a key driver, but said that this is “another excellent, progressive, yet necessary step from the Bank of England and other central banks”.

“The bank has trialled proof of concepts for digital currency in the past, but the technology was not there. We have seen significant advances in blockchain and associated technologies – now might be the right time to try again,” Rice said.

“I cannot see central banks giving up control of monetary policy. But projects like Facebook’s Libra and others currently in design might have called that into question. Add into the mix the power and growth of China as a world economy, the rise of other emerging economies and the fight the US will put up to maintain the status of the dollar, then it makes perfect sense for the Bank to take this action. If it didn’t it could become an existential question.”

The group will closely coordinate with the relevant institutions and forums, particularly 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 Bank of England and Chair of the CPMI. It will include senior representatives of the participating institutions.

Guo concluded: “Hopefully the CBDC of the future will be able to walk the line between state-issued currencies and the advantages of crypto.”

Related Posts