Lots of Studying by Central Banks on Digital Currencies

Lots of Studying by Central Banks on Digital Currencies by Larry White – Lone Star White House

We have noted here that at some point next year we could see the first central bank digital currency show up. This won’t be surprising since this topic is being studied all around the world by central banks and the IMF and BIS are also watching the space.

Below are links that will give you some examples of how pervasive this topic is in the world of central banking even as central banks have not yet made any actual significant change that might impact the global monetary system. In just one article, Bloomberg takes us on a tour around the globe to see how the major central banks view both Bitcoin and distributed ledger technolgy (see link below).

Bank for International Settlements (BIS) – Central Bank Cryptocurrencies

“New cryptocurrencies are emerging almost daily, and many interested parties are wondering whether central banks should issue their own versions. But what might central bank cryptocurrencies (CBCCs) look like and would they be useful? This feature provides a taxonomy of money that identifies two types of CBCC – retail and wholesale – and differentiates them from other forms of central bank money such as cash and reserves. It discusses the different characteristics of CBCCs and compares them with existing payment options.”

IMF – Central Banking and Fintech – Brave New World?

“Instead, citizens may one day prefer virtual currencies, since they potentially offer the same cost and convenience as cash—no settlement risks, no clearing delays, no central registration, no intermediary to check accounts and identities. If privately issued virtual currencies remain risky and unstable, citizens may even call on central banks to provide digital forms of legal tender.”

Bloomberg – Here is What the World’s Central Banks Think about Bitcoin

“The guardians of the global economy have two sets of issues to address. First is what to do, if anything, about emergence and growth of the private cryptocurrencies that are grabbing more and more attention — with bitcoin now surging toward $10,000. The second question is whether to issue official versions.”

Conclusion: It is hard to tell how quickly we might see central bank digital currencies show up. My guess is that Singapore, China, and Russia are the most likely places to see it first. There are still questions to be resolved for any central bank studying the idea:

– Will individual citizens be able to open central bank accounts to hold digital currencies?

– If so, how would that impact the private commercial banks?

– Would a central bank use a distributed ledger to support a digital currency or not?

– Will a new standard ledger technology emerge that all or most banks and central banks adopt to use with digital currencies?

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