The Committee on Payments and Market Infrastructures (CPMI) has a mandate to promote “the safety and efficiency of payment, clearing, settlement and related arrangements, thereby supporting financial stability and the wider economy.” Retail payments have been the subject to particular attention by the CPMI, reflecting the interest of central member banks in this issue. Recent work by the CPMI in this field includes the reports Innovations in retail payments (2012) and Non-banks in retail payments (2014). In the latter report, decentralised digital currencies were briefly discussed.

The CPMI has now published a report on Digital currencies. The emergence of digital currencies was noted in both of the earlier CPMI reports. The report now published provides an overview of the key features of digital currencies, including how they differ from traditional forms of electronic money (e-money). Also, it discusses some of the main factors influencing the development of digital currencies and distributed ledgers from both the demand and supply sides. It also details some of the potential implications of digital currencies should the degree of their acceptance increase substantially.

The report notes two key features of digital currencies:

  • the first is the assets themselves (such as bitcoins). These assets can have some of the characteristics of a commodity and some of a currency. Currently, their monetary features (such as their use as a means of payment) are often more prominent, yet, these assets are not typically issued in or connected to a sovereign currency, are not a liability of any entity, are not backed by any authority and have no intrinsic value; and
  • the second feature is the technology used. Particularly noteworthy is the use of distributed ledgers. Most financial transactions are made via a centralised infrastructure, where a trusted entity clears and settles transactions. Distributed ledgers are innovative because they allow transactions in the absence of trust between the parties and without the need for intermediaries.

View Digital currencies, 23 November 2015