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Bank for International Settlements: Plans to issue a proof-of-concept central bank digital currency with the Swiss National Bank before the end of the year

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This work will pave the way for experimentation with what constitutes a retail central bank digital currency (CBDC).

Original title: "BIS: Plan to issue a central bank digital currency in the proof-of-concept stage with the Swiss National Bank before the end of the year"

Original source: The Paper

Global central bank digital currency research and development is in full swing.

On October 25th, Benoît Cœuré, head of the Innovation Center of the Bank for International Settlements (BIS), said at the second Bund Summit that by the end of this year, BIS plans to Jointly issue a batch of central bank digital currency (CBDC proof-of-concept) at the proof-of-concept stage with the Swiss National Bank.

Cœuré introduced that this work will pave the way for experiments on the elements of a retail central bank digital currency (CBDC). These building blocks may include connectivity to existing payment systems, application interfaces, digital identity rails, compliance monitoring, and more. But to do this, BIS also needs to improve the level of blockchain.

Cœuré said that in the future, BIS also intends to establish cross-border use of digital currency with a number of central banks, including the Hong Kong Monetary Authority of China and the Bank of Thailand. The Innovation Center is currently running trials in Singapore, Switzerland, and Hong Kong SAR, China, and will soon be working in Frankfurt, Paris, London, Stockholm, and Toronto.

The Bank for International Settlements, known as the "central bank's central bank", released a report jointly with seven central banks including the Federal Reserve on October 9: "Central Bank Figures Money: Fundamentals and Core Features. According to the report, 80% of the countries in the world have entered the stage of digital currency research and development, pilot and implementation. Recently, the digital currency "race" has become more and more lively, and more and more countries have entered the internal pilot period.

The report clarifies three basic principles that the publicly issued CDBC must follow to help the central bank achieve its public policy goals:

1) Coexistence with cash and other types of money in flexible and innovative payment systems;

2) support broader policy objectives without compromising monetary and financial stability;

3) various Functionality should foster innovation and efficiency.

In the report, BIS urged countries to conduct an in-depth analysis of the impact of digital currencies on monetary policy and financial stability when used in cross-border transactions. The report found that large holdings of another country's digital currency could lead to stronger, unintended international spillovers. Specifically, it includes: violent exchange rate fluctuations, "digital dollarization" in other countries, promotion of tax avoidance, and weakening of supervision by domestic authorities. Therefore, under the above potential risks and challenges, more research on cross-border digital currency transactions is needed to ensure the security of currency transactions while improving efficiency.

In January this year, the Bank of Japan, the European Central Bank, and the Bank of England established a central bank digital currency team to jointly assess the possibility of CBDC. The central banks participating in this report include 7 major global central banks including the Federal Reserve, the European Central Bank, the Bank of England, the Swiss National Bank, the Riksbank, the Bank of Japan, and the Bank of Canada.

On July 1, 2019, BIS announced the creation of an Innovation Center to facilitate central bank collaboration in innovative financial technology. The Innovation Center will initially set up branches in Switzerland, Singapore and Hong Kong, China, and BIS will also work closely with the Swiss National Bank, the Hong Kong Monetary Authority and the Monetary Authority of Singapore on this. On June 18 last year, Libra Network (Libra Network), a subsidiary of American social giant Facebook (Facebook) in Switzerland, released a white paper on its encrypted digital currency project, which aroused widespread concern around the world.