On 13 March 2019, the Markets Committee and Committee on Payments and Market Infrastructures of the Bank for International Settlements (BIS committees) published a report on central bank digital currencies (CBDCs).
The report follows work from the BIS committees on CBDCs in which they analysed the potential implications for payment systems, monetary policy implementation and transmission as well as for the structure and stability of the financial system.
Key takeaways from the BIS committees’ work include:
- many forms of CBDC are possible, with different implications for payment systems, monetary policy transmission as well as the structure and stability of the financial system. Two main CBDC variants are: a wholesale and a general purpose one;
- wholesale CBDCs, combined with the use of distributed ledger technology, may enhance settlement efficiency for transactions involving securities and derivatives. Currently proposed implementations for wholesale payments – designed to comply with existing central bank system requirements relating to capacity, efficiency and robustness – look broadly similar to, and not superior to, existing infrastructures;
- some central banks are analysing a CBDC that could be made widely available to the general public and serve as an alternative safe, robust and convenient payment instrument. In circumstances where the traditional approach to the provision of central bank money was altered by the disappearance of cash, the provision of CBDC could bring substantial benefits;
- a central bank introducing such a CBDC would have to ensure the fulfilment of anti-money laundering and counter terrorism financing requirements, as well as satisfy the public policy requirements of other supervisory and tax regime; and
- the introduction of a CBDC would raise fundamental issues that go beyond payment systems and monetary policy transmission and implementation. A general purpose CBDC could give rise to higher instability of commercial bank deposit funding. Even if designed primarily with payment purposes in mind, in periods of stress a flight towards the central bank may occur on a fast and large scale, challenging commercial banks and the central bank to manage such situations.
The BIS committees advise any steps towards the possible launch of a CBDC should be subject to careful and thorough consideration. Further research on the possible effects on interest rates, the structure of intermediation, financial stability and financial supervision is warranted. More generally, the BIS Committees recommend central banks and other authorities continue their broad monitoring of digital innovations, keep reviewing how their own operations could be affected and continue to engage with each other closely.