In the wake of regulatory concerns, seven central banks have come together and released a report identifying the “foundational principle necessary for any publicly available CBDCs to help central banks meet their public policy objectives.”
The report titled, Central bank digital currencies: foundational principles and core features, compiled by the participating banks like the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, Sveriges Riksbank, the Swiss National Bank and the Bank for International Settlements [BIS].
Among the several principles highlighted in the report, a CBDC should coexist with cash and other types of money “in a flexible and innovative payment system.” Other principles for a CBDC included that it did not disrupt monetary and financial stability, but support wider policy objectives. Lastly, it should promote innovation and efficiency.
As the group laid down the principles, it identified the core features of any future CBDC as follows:Resilient and secure to maintain operational integrity.Convenient and available at very low or no cost to end-users.Underpinned by appropriate standards and a clear legal framework.Have an appropriate role for the private sector, as well as promoting competition and innovation.
The central banks around the world have been actively researching technical experimentation and practical policy analysis for the development of CBDC. This collaborative effort may fast-track the speed of innovation. According to the President of the European Central Bank, chair of the group of central bank governor, Christine Lagarde,
“…Central banks must complement their domestic efforts with close cooperation to guide the exploration of central bank digital currencies to identify reliable principles and encourage innovation. The present report is a convincing proof of this international cooperation.”
The group will carry on exploring open questions around CBDCs and the cross-border payments. It will also continue outreach domestically and with other central banks.