The Bank for International Settlements (BIS) has published a number of reports on their research into cryptocurrencies, blockchain technology, digital ledger technology and the resulting possibility central bank digital currencies (CBDCs). Much of their research goes into breaking down the granular differences between these technologies and how they could foster a more efficient global economy. In their most recent report, the organization surveyed 63 central banks worldwide, about their interest, experience with and plans for these technologies. 41 are based in emerging market economies (EMEs), and 22 are advanced economies. This represents almost 80% of the world’s governments, and 90% of economic output.
The study found that about 70% of central banks are conducting research into CBDC issuance. Further planning for integration of such things vary considerably, as well as the goals intended from the technology. Roughly 50% are currently running CBDC research, pilot projects or proof-of-concepts. This is 15% increase since their 2017 report. Only 5% of the central banks are running CBDC proof-of-concepts. However, the prevalence of the technology will likely continue to grow, especially regarding interest from BIS.
The bank is essentially the central bank of central banks. It provides banking services, but only to central banks and other international organizations. It was established in 1930 through an agreement between Germany, Belgium, France, the United Kingdom, Italy, Japan, the United States, and Switzerland to facilitate reparations imposed on Germany from the Treaty of Versailles after World War I. Obviously this did not last forever, but the organization quickly took took on a much more general, but vital role to the global economy.
Our mission is to serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in those areas and to act as a bank for central banks.
fostering discussion and facilitating collaboration among central banks;
supporting dialogue with other authorities that are responsible for promoting financial stability;
carrying out research and policy analysis on issues of relevance for monetary and financial stability;
acting as a prime counterparty for central banks in their financial transactions; and
serving as an agent or trustee in connection with international financial operations.
Goals Facilitated By Cryptocurrency
The organization is working to make monetary policy more predictable and transparent among its the 60 central bank members. Two vital aspects of this goal are two of the most prevalent capabilities related to cryptocurrencies, blockchain technology, digital ledger technology and CBDCs.
Regulating capital adequacy - Capital adequacy policy is the checks and balances for equity and capital assets of central banks to make sure that they are appropriately valued and reflect the current market conditions or adequately assess the risk of their trading positions. Tokenized assets can facilitate built in transparency in this regard.
Reserve transparency - Reserve policy ensures liquidity and prohibits banks from creating money in specific industries or regions without limit. Cryptocurrencies or a CBDC could perfectly facilitate this kind of transparency.
CBDC vs. Cryptocurrency
Traditional cryptocurrencies are based on an open, public network supported by a public mining system. CBDCs would likely operate on a centralized network, but interact with public networks. BIS delineates CBDCs as “wholesale” (restricted-access digital tokens for wholesalet ransactions between banks) and “retail.” Retail CBDCs can either be “general purpose”(functioning similar to fiat, but digital) or “account-based” (operating similar to exchange traded products).
By: BGN Editorial Staff