Central banks sketch out digital currency as China forges ahead

By Huw Jones and Tom Wilson
LONDON, Oct. 6 / PRNewswire / - A group of seven major central banks, including the US Federal Reserve, set out on Friday what a digital currency could look like to keep up with China's "groundbreaking" pace, and private projects like Facebook Inc's Libra Stablecoin . to skip .
Central banks and the Bank for International Settlements (BIS) said core characteristics should include resilience, availability at low or no cost, adequate standards and clear legal frameworks, and an adequate role for the private sector.
Bank of England (BoE) deputy governor and chairman of a BIS committee on payments, Jon Cunliffe, said the surge in cashless payments since lockdowns to fight the pandemic has accelerated the change in forms of money through technology.
Central banks began digging deeply into digital currencies after Facebook announced last year its as-yet-to-be-launched digital token-scale that would be backed by a mix of major currencies and sovereign debt. The body behind Libra has since tweaked plans and is now hoping to launch multiple "stablecoins" backed by individual currencies.
Central banks need to keep pace to avoid the private sector inappropriately closing payment gaps, Cunliffe said.
In addition to the Fed and BoE, the seven central banks that have joined forces with the BIS include the European Central Bank, the Swiss National Bank and the Bank of Japan, but not the People's Bank of China.
China is already testing a digital renminbi. The PBOC said this would increase the yuan's reach in a world currently dominated by the dollar.
Japan's top financial diplomat, Kenji Okamura, said Thursday that China is aiming to gain a first mover advantage in building its own digital currency and warned it was "something we should be scared of".
"I don't think this is a central bank race," Cunliffe said, adding that no central bank digital currency (CBDC) response would dominate the world.
Benoit Coeure, head of innovation at the BIS, said there is no international race, but central banks have the advantage of quickly catching up with the private sector and driving the curve for shaping the future.
The International Monetary Fund could play an important role in managing cross-border "spillovers" of a national CBDC, Coeure said.
(Reporting by Huw Jones and Tom Wilson, editing by Emelia Sithole-Matarise)

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