Report: 70% of Central Banks are Studying Digital Currencies

Approximately 70% of the banks surveyed by the Bank for International Settlements (BIS) said they have already started working on a central bank digital currency (CBDC) or they are considering the development of their own virtual currency.

50% Of Banks Surveyed Have Moved To "Proof-of Concept" Stage

The Bank for International Settlements (BIS) is an institution owned by major central banks worldwide and it focuses on providing improved “international monetary and financial cooperation.” There were reportedly a total of 63 banks that participated in BIS’ survey and these institutions represented jurisdictions covering over 80% of the world’s population. The banks responding to the survey account for over 90% of the global economic output.

As mentioned in a report published by BIS, the financial institution’s survey involved conducting conceptual research on the process of creating CBDCs. Several banks worked cooperatively to develop a “common understanding of this new field of study.” Around half, or 50%, of the respondents have now moved to “hands-on” proof-of-concept activities to determine the feasibility and desirability of introducing a CBDC.

IMF Head: CBDCs Are "Safe" And "Cheap"

85% of the banks surveyed by BIS said it is unlikely that they’ll issue their own virtual currency in the short-term, or the next 1-3 years.

As CryptoGlobe reported in mid-November 2018, Christine Lagarde, the head of the International Monetary Fund (IMF), had recommended that all financial insitutitions should consider launching their own digital currency. Lagarde believes blockchain-based currencies are “safe, cheap, and potentially semi-anonymous” and would help in “supplying money to the digital economy.

However, there are many other senior banking and traditional financial market professionals worldwide who think that both CBDCs and decentralized cryptocurrencies may not be beneficial to the world’s financial system. In September 2018, the European Central Bank (ECB) had clarified it was not planning to launch its own CBDC.

Uruguay And Sweden Have Reported Making Considerable Progress In Developing CBDC

As pointed out by the research group at the St. Louis Fed (in December 2018): 

Once you add a central bank and remove the “permissionless” network—with nodes that can leave and join as they wish, there isn’t much left to the cryptocurrency you started with.

Despite concerns regarding whether they’re appropriate for a centrally managed financial system, some central banks are still considering exploring the idea of a CBDC. The BIS report revealed that Uruguay’s central bank had been testing out a general purpose CBDC.

Notably, the BIS research report also mentioned that Uruguay and Sweden had made considerable progress in creating their own CBDC and they had also publicly shared most of their findings in order to help banks in other countries.

Japanese Lawmakers Propose Digital Yen over Concerns Surrounding Libra, China

A group of Japanese lawmakers has started working on a proposal for Japan to issue its own digital currency over concerns surrounding Facebook’s Libra and China’s upcoming digital yuan.

According to Reuters the cryptocurrency, a digital equivalent of the yen, would be a joint initiative between the country’s government and private companies to put Japan “in tune with global changes in financial technology.” Speaking to the news agency Norihiro Nakayama, parliamentary vice minister for foreign affairs, stated:

The first step would be to look into the idea of issuing a digital yen… China is moving toward issuing digital yuan, so we’d like to propose measures to counter such attempts.

The group of lawmakers, comprised of about 70 Liberal Democratic Party members, is led by former economy minister Akira Amari, and plans to submit a proposal to the government as early as next month.

Reuters notes that Japan is unlikely to issue its own digital currency any time soon as there are technical and legal barriers to overcome, although the move comes as the Bank of Japan, the country’s central bank, joined six other central banks to share expertise on creating digital currencies.

The report adds that Shinzo Abe, the country’s Prime Minister, recently told parliament the government will work with the Bank of Japan in studying digital currencies and “ways to enhance the yen’s convenience as a settlement means.” Some Japanese lawmakers, it says, voiced concerns over China’s move to expand the yuan’s influence as a settlement currency.

A former board member of Japan’s central bank, Takahide Kiuchi, was quoted as saying:

The BOJ probably won’t want to do anything that would stifle private-sector innovation. The best way could be to issue a hybrid-type digital currency that is operated and issued by private firms, with the central bank’s involvement.

Kiuchi noted he believes China and Japan have different motives to issue their own cryptocurrencies. While china ants to enhance the yuan’s influence, Japan would be trying to change its cash-loving culture.

Japan, it’s worth noting, has been accepting bitcoin as legal tender since April 2017, and is home to various prominent cryptocurrency businesses.

Featured image via Unsplash.