The Bank for International Settlements (BIS) announced his full support for the development Central bank digital currencies (CBDCs) in pursuit Financial and currency stability through international cooperation with mandate and support from central banks.
CBDCs are critical to modernizing finance
The BIS acknowledged that CBDCs need to modernize finance and keep big tech in check in order not to control money.
Benoit Coeure, a member of the BIS, warned:
“Without CBDCs, digital money would increasingly be dominated by large tech companies as they would leverage enormous user bases on social media.”
CBDCs are digital assets that are tied to a real asset and through which Central banksthat is, they represent a requirement on the bank, just as banknotes work. In addition, they are blockchain-enabled, which is a new technology for issuing central bank money at the wholesale and retail levels.
According to the announcement:
“In her upcoming annual report, she estimated that at least 56 central banks and monetary authorities, representing roughly a fifth of the world’s population, are now looking at digital currencies as e-commerce moves.”
The issuance of CBDCs appears to be a race against time; Many nations believe that owning a CBDC is critical to controlling global markets.
The Bahamas – the first nation to adopt a CBDC
The Bahamas introduced the sand dollar last October, making it the first country in the world to officially publish a CBDC beyond the testing phase.
As more nations showed their interest in CBDCs, the BIS found that authorities would have to decide whether citizens would need digital IDs to use them or choose the token-based route, which makes transactions more anonymous.
In November 2020 the International Monetary Fund (IMF) advised central banks not to overlook some key legal frameworks necessary for a CBDC to function.
Once in place, CBDCs are expected to drive the financial inclusion of nearly 1.7 billion people who have been excluded from the banking system.
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