Central banks detail CBDC ‘foundational principles and core features’ in report

09 Oct 2020

As Central Bank Digital Currencies (CBDCs) come into sharp focus around the world, several banking authorities have produced a joint document regarding the currency type.

The Bank for International Settlements (BIS) informed Cointelegraph that seven central banks and the BIS had collaborated on the report "identifying the foundational principles necessary for any publicly available CBDCs to help central banks meet their public policy objectives."

CBDCs have taken centre stage this year, with numerous countries showing increasing interest. China has advanced with its plans for the digital yuan, although the Chinese central bank wasn’t involved in the report.

China is currently testing its digital currency and to date has carried out $162 million USD worth of digital yuan transactions. 

Central banks involved in compiling the document entitled ‘Central bank digital currencies: foundational principles and core features’, include the Bank of England, the U.S. Federal Reserve and the Bank of Japan.

Nevertheless, the BIS statement affirmed that the parties involved did not provide any opinions on the launch of a digital currency, or any firm plans for launching a CBDC.

The report stated: "This report is not about if or when to issue a CBDC. Central banks will make that decision for their jurisdictions (in consultation with governments and stakeholders). None of the central banks contributing to this report have reached a decision on whether or not to issue a CBDC."

Furthermore, the document features three essential principles on which a future CBDC and its ecosystem, should be based: "A central bank should not compromise monetary or financial stability by issuing a CBDC; (ii) a CBDC would need to coexist with and complement existing forms of money; and (iii) a CBDC should promote innovation and efficiency."

The report went on to add that crucial components of CBDCs include convertibility, convenience, security, speed, scalability, legal soundness as well as numerous other categories.