The Federal Reserve is collaborating with seven central banks and the Bank for International Settlements (BIS) to hammer out a framework for digital currency.
The worldwide COVID-19 pandemic has accelerated cashless payments and highlighted the impact of technology on how money is exchanged, Jon Cunliffe, deputy governor at the Bank of England (BoE) and chair of a BIS committee on payments, said in a Reuters report on Friday (Oct. 9).
The central banks working with the BIS include the European Central Bank, the Swiss National Bank and Bank of Japan. The People’s Bank of China (PBOC) is already testing the renminbi, a digital currency it says will extend the yuan’s worldwide reach.
Cunliffe also told Reuters that he did not think any single approach to a central bank digital currency (CBDC) would end up being the dominating force.
“I don’t think this is a race between central banks,” Cunliffe said. He added that central banks have to be at the forefront of digital money to avoid the private sector filling the void.
Central banks started aggressively stepping up plans for an electronic currency after Facebook announced plans in 2019 for the stablecoin libra. Its plan is to release several coins backed by individual currencies.
A May BIS survey of 66 central banks indicated that 80 percent are working on CBDCs.
Fed Governor Lael Brainard said in August that the Federal Reserve Bank of Boston is working with researchers at MIT to “build and test a hypothetical digital currency oriented to central bank uses.” The Fed also launched an instant payment initiative in August.
Last month, Cleveland Federal Reserve President Loretta Mester said in her speech “Payment and the Pandemic” that laying the groundwork for digital currency has been a priority since before COVID-19.
She added that a May Fed survey of consumers indicated that Americans had increased their cash holdings during the pandemic.
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