The Bank for International Settlements (BIS) says central bank digital currencies (CBDCs) are needed to ensure governments retain control of money.

BIS’s remarks come amid the global fall in the use of physical cash. Cryptocurrencies are also gaining traction as both investments and legal tender. This has motivated Big Tech firms to begin developing their own digital currencies. For instance, in 2019 Facebook proposed its Libra digital currency could act as a universal currency. However, widespread condemnation caused it to scale back its intentions to the current Diem project.

It is these ambitions, however, that the BIS is fearful of. They believe that without CBDC digital money would become increasingly dominated by big tech firms. This could happen primarily by them leveraging their enormous social media user base. The loss of control over sovereign money, “that is a place where you don’t want to be, where governments don’t want to be,” said Benoit Coeure of the BIS. 

BIS discussed the potential for CBDCs in a chapter in its latest Annual Economic Report. While applauding advancement in the payment systems, it added that their benefits would depend on their structure and governance. On the one hand, the technology could enable a “virtuous cycle” of broader access, lower costs, as well as better services.

However, the report notes the potential for a “vicious cycle” of data silos, market power, and anti-competitive practices. “CBDCs and open platforms are the most conducive to a virtuous circle,” the report notes.

According to the report, 56 central banks and monetary authorities are at least considering developing CBDCs. The BIS is even working with a handful of them to help establish standards. For instance, CBDCs are being designed for use among financial intermediaries only (wholesale CBDCs), or by the wider economy (retail CBDCs). Another recent paper from the BIS suggested that digital banknotes, running “on ‘intermediated’ or ‘hybrid’ CBDC architectures” showed particular promise.

Additionally, CBDCs could improve cross-border payments, and limit the risks of currency substitution. However, authorities still need to decide whether citizens need digital ID’s to use CBDCs. They could also pursue a token-based route similar to cryptocurrencies that keep transactions more anonymous. Although, BIS prefers the ID system, as it would prevent people using digital currencies from countries other than their own.

The post BIS Says CBDCs Necessary to Keep Government Control of Money appeared first on BeInCrypto.

Similar to Notcoin - Blum - Airdrops In 2024

origin »

195 +