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BIS calls for global collaboration on CBDC designs

The Switzerland-based Bank for International Settlements (BIS) on Monday released a report produced in collaboration with the IMF and the World Bank.

The Bank for International Settlements (BIS) has asked countries to cooperate in the early stages of designing a central bank digital currency (CBDC) to make it easier for systems to operate across borders. than.

Each jurisdiction will have its own regulatory framework, but many of the design features for CBDCs – which are digital versions of existing sovereign currencies such as the US dollar – are yet to be decided. allows central banks to start with a “clean-up vehicle,” according to a joint-release of the BIS with the International Monetary Fund and the World Bank.

This conclusion is consistent with that of Cecilia Skingsley, who is the first deputy governor of the central bank of Sweden and soon to be head of innovation at BIS, based in Basel, Switzerland. Two weeks ago, she warned about the possibility of countries not “playing nice” with each other over CBDC design.

“To promote coexistence with other forms of money and means of payment and reasonable levels of CBDC adoption, interoperability with systems beyond CBDCs, both domestically and across borders, is fundamental,” the report said.

It’s no secret that countries across the globe are considering establishing CBDCs at least in part in response to the crypto market boom. The Bahamas was the first to launch a digital currency, dubbed the “sand dollar,” in 2020, and China has been pushing to test its digital yuan. Nigeria launched its own CBDC, eNaira, in October.

When building a CBDC, central banks will have to decide on a few key issues – such as who can use the CBDC and whether private payment companies can access their CBDC infrastructure. According to the BIS report, central banks can agree to a common set of standards, or use different “interoperable” systems that still allow people to transact with each other, or have only one access point. unique access between systems.

The report goes on to say that each CBDC approach model has different implications for risk, effectiveness, resilience, and interoperability, noting that there is no single solution, “one size fits all”.
For example, while compatibility may be the least expensive form of interaction, it may not achieve the same efficiency benefits as linking multiple systems together or developing a single system, the report said.

In general, linking CBDC systems together through a hub and say – where a common hub connects two or more separate CBDC systems or a single system model using the infrastructure similarity and a general rule book – could bring more improvements to the cross-border payments market than other options, according to the report.

The BIS lays out five criteria for central banks to consider when moving along with their CBDC options. The report says central banks must not harm, enhance efficiency, increase resilience, ensure coexistence and interoperability with other systems, and enhance financial inclusion.