LONDON – Top financial institutions demand global cooperation on the central bank’s digital currencies.
The Bank for International Settlements, the global body of central banks, issued a report Friday that central banks should work to achieve “interoperability” between their digital currency projects.
This can be achieved in a number of ways, the report said, such as creating common standards and establishing international payment infrastructures.
The report was written in collaboration with the International Monetary Fund and the World Bank.
Several central banks are exploring digital currencies issued by central banks to commercial banks or directly to the public. Their efforts have intensified over the past year due to a decline in cash use and growing interest in cryptocurrencies like bitcoin.
The People’s Bank of China has been a leader, with lawsuits already in place in several cities.
“I think every central bank, every country, should have its own sovereign currency,” Agustín Carstens, director general of the Bank for International Settlements, or BIS, told CNBC’s Annette Weisbach on Friday.
“Given that virtually all central banks are thinking about this, it is a unique opportunity for the digital currencies of the various central banks to be interoperable,” Carstens said, adding global central banks should ensure that their systems are “congruent with each other” and that ” Transactions in different currencies can be performed in a hassle-free manner. “
The BIS is an umbrella group for central banks representing institutions from the US Federal Reserve to the People’s Bank of China. Its report with the IMF and the World Bank said the central bank’s digital currencies or CBDCs could enable cheaper and faster cross-border payments.
At this point, “payment from, say, Mexico to the United States could take days,” Carstens said. “Sometimes the commissions you pay are 7%. That’s ridiculous.”
“What we need to do is take advantage of the fact that pretty much everyone starts from a clean slate so that from the beginning we can incorporate the interconnection between the different systems.”
However, the BIS report highlighted a number of outstanding issues with CBDCs still to emerge, such as the role of “private industry” actors.
Diem, a digital currency proposed by Facebook, provoked widespread condemnation from regulators when it was originally launched in 2019.
Meanwhile, so-called stack coins like tether – often backed by sovereign currencies like the dollar – have attracted growing criticism from economists and regulators due to a perceived lack of transparency.