The Bank of England (George Rex via Flickr, CC-BY-SA).
Politics

6 central banks team up to explore digital currencies

England’s apex bank is joining forces with the Bank of Canada, the Bank of Japan, the European Central Bank, and others to study use cases for central bank digital currencies

The Bank of England announced Tuesday that it has formed a working group with five other central banks to look into whether they should issue their own central bank digital currencies.

A central bank digital currency, or CBDC, is a digital version of a fiat currency that is issued and regulated by the competent monetary authority of the country. In many ways a CBDC is similar to a stablecoin, in that the digital money is backed by actual money. 

Others in the group include the Bank of Canada, the Bank of Japan, the European Central Bank—which oversees the Euro—the Sveriges Riksbank, which is the central bank of Sweden, and the Swiss National Bank, along with the Bank for International Settlements, a global institution owned by central banks.

The Bank of England said the group will explore “CBDC use cases; economic, functional and technical design choices, including cross-border interoperability; and the sharing of knowledge on emerging technologies.”

Benoît Cœuré, a French economist who heads the BIS Innovation Hub, a new project designed to support central bank collaboration, will serve as co-chair of the group, along with Jon Conliffe, who is the deputy governor of the Bank of England. 

The group will also work closely with other global forums and groups, including the Financial Stability Board, an international body that monitors the global financial system, and the Committee on Payments and Market Structures, which is also chaired by Conliffe. 

A global trend

Ever since social media network Facebook began working on its Libra cryptocurrency project, which it hopes to launch later this year, central bank digital currencies have become a thing.  

Last month, Sweden’s central bank announced it was inking a deal with consultancy firm Accenture to create a pilot platform for a digital currency, known as the e-krona.

The Riksbank has been edging toward issuing its own digital currency for some time, which is no surprise given that Sweden is at the vanguard of countries embracing digital payments. 

Likewise, the European Central Bank has also been exploring the benefits of a CBDC since last year. In December, Banque de France Governor François Villeroy de Galhau said a potential French CBDC could be a bridge to an EU-wide CBDC.

And it’s not simply Japan and countries in Europe looking at digital currencies. Elsewhere in the world, The People’s Bank of China recently said it has completed the “top-level design” and testing of its yuan-backed digital currency, meant to partially replace cash in the country.

The U.S. is not making any official moves in the direction toward a CBDC, which Treasury Secretary Steven Mnuchin said in December was not needed. However, Chris Giancarlo, the former chairman of the Commodity Futures Trading Commission, last week launched a nonprofit to promote a dollar-backed CBDC in partnership with Accenture.

(Update on Jan. 21 at 8 p.m.: headline changed to read six central banks. Previously it said seven, but the Bank for International Settlements is a global institution owned by central banks, not a central bank.)

Amy Castor has more than 20 years' experience in journalism. Her work on crypto and blockchain has appeared in consumer and trade publications throughout the U.S., including CoinDesk, Forbes, Bitcoin Magazine, and The Block.