How things have changed since spring of 2019, when Agustin Carstens, general manager of the Bank for International Settlements (BIS), was issuing his latest warning over the need for caution when considering central bank digital currencies (CBDC).
Now, according to Chinese news source The Paper, the very same institution – dubbed the central bank for central banks – is planning its own trial of a CBDC in collaboration with the Swiss central bank.
Revealed by Benoit Coeure, head of the BIS Innovation Hub, at the Bund Summit in Shanghai, Oct. 23–25, the proof-of-concept initiative would be underway before then end of the year and would open a route to experimentation looking at use cases for a retail – i.e. cash equivalent – CBDC.
These could include how the digital currency might interoperate with existing payment systems, a role in digital identity and tracking financial compliance, per the report.
Such use cases would require more work on the blockchain technology underlying the CBDC, Coeure said.
BIS will also look into how to facilitate cross-border payments using digital currency between central banks such as including the Hong Kong Monetary Authority and the Bank of Thailand.
According to Coeure, the BIS Innovation Center is already carrying out experiments in Singapore, Switzerland and Hong Kong, and has plans to expand the work to Germany, France, the U.K., Sweden and Canada.
The comments from Coeure, who sat on the executive board of the European Central Bank (ECB) until last year, come soon after the BIS and seven central banks issued a report setting out the core principles for national digital currencies.
While many central banks are still publicly saying they are evaluating the technology, there appears to be a general movement towards rolling out national digital currencies in coming years. A digital euro is looking very likely, according to leaders at the ECB, and CBDC trials are planned in Russia, South Korea and Japan.
Driving the movement, has been the People’s Bank of China, which has been in full development mode for several years and appears to be in the final stages before a live launch of a digital yuan.