7 Central Banks and BIS Collaborate to Analyze Retail CBDC Policy Challenges

The Bank for International Settlements (BIS) and 7 central banks have recently published a paper detailing an ongoing policy review on a retail central digital currency (rCBDC).

The 7 banks which are The central banks of Canada, the European Union, Japan, Sweden, Switzerland, England and the United States, since 2020, have locked hands to establish an effective principle and key feature they found desirable in an rCBDC.

Since then, they have published three reports on likely issues rCBDC might face, going forward.

What You Should Know About Former Papers

The first report explores the possibility of a private-public joint force and interoperability into teh CBDC systems to achieve innovation, choice and competition among a diverse mix of intermediaries.

The second published paper details how CDBC could best serve users and businesses in a fast technological environment. The paper also explained the need for adopting strategies that accommodate multiple perspectives through public consultations.

The third publication from the seven highlighted the possible impact CBDC will have on the banking system. Once deployed, CBDC will impact the banking system via intermediation capacity and resilience.

More Information on the Recent Paper

The latest publication discussed policy elements that were previously examined. The paper expressly examined stakeholders’ agreements, relationships and dialogue with legislators since legal issues related to CBDC will largely be a matter of national law.

Bank for International Settlements

2023-05-29 06:22

Seven central banks and the BIS take forward their work on retail central bank digital currencies. A new report summarises ideas and perspectives on policy options and practical implementation issues https://t.co/Qppbwn7OrS #CBDC https://t.co/lDZMUlRhUZ

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The paper however highlighted seven legal issues. the bone of contention is whether rCBDC might be a legal equivalent of cash or a new form of legal tender.  Among other issues is privacy which makes headlines in many current public debates about CBDC.

The CBN might have a Solution.

CBDCs can be issued by central banks with ease:

“In order to create and manage a complex value chain for banknotes, a mass-market retail commodity, central banks already have the necessary knowledge.”

In addition, the incorporation of the private sector towards the creation of the CBDC cosmos is more practical, according to the paper. Furthermore, the public’s approval will be crucial to the effective implementation of a CBDC, and that role must be recognized beforehand:

“The adoption of CBDC might not reach certain policy goals unless a particular threshold is reached.”

Challenges facing CBDC

One of the challenges facing the CBDC is the designs that will accommodate retail and wholesale of the currency towards ensuring the cross-border relationship between CBDCs. The currency might also face challenges which according to the paper are not likely to work with the CBDC system. This implies that CBDC might not be the cheapest or most efficient platform for all types of transactions.

At this point, none of the central banks that participated in the study currently have any plans to implement a CBDC.

Final Note

The role of central banks is to guarantee that the safest form of money is available to the public. Therefore it is imperative to sit back and relax while we await further news concerning teh CBDC.