Countries come together in hope of creating cryptocurrency backed by central banks

China also rumoured to be working on digital currency

Anthony Cuthbertson
Tuesday 21 January 2020 19:36
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Bank of England will join forces with Bank of Japan and European Central Bank to explore cryptocurrency
Bank of England will join forces with Bank of Japan and European Central Bank to explore cryptocurrency

The Bank of England has created an international group to explore the possibility of developing a cryptocurrency backed by central banks.

The central banks of Japan, Sweden, Switzerland and the eurozone joined the initiative, together with the Bank of International Settlements (BIS).

The group will look at the economic and technical benefits that a bitcoin-style digital currency could offer.

Global focus on central bank digital currencies (CBDC) intensified last year after Facebook announced plans to introduce a cryptocurrency called Libra.

The European Central Bank subsequently expressed an interest in creating its own digital currency, while China has also moved forward with plans to launch a state-backed cryptocurrency.

“The group will assess CBDC use cases; economic, functional and technical design choices, including cross-border interoperability; and the sharing of knowledge on emerging technologies," the banks said in a joint statement on Tuesday.

Figures within the cryptocurrency industry welcomed the news, claiming it indicated regulators are at last recognising the potential benefits of digital currencies.

“When the first national central bank issues a CBDC, this will be a major milestone in monetary history and a turning point for the global financial system,” Andy Bryant, co-head of popular cryptocurrency exchange BitFlyer, told The Independent.

“However, at this stage, there is still a lot up for discussion. The particular design of each new CBDC — for instance, whether or not it bears interest — will have profound implications on its effectiveness as a monetary policy instrument.”

Marcus Swanepoel, CEO of London-based cryptocurrency firm Luno, described it as “very positive” but warned it would be a slow process.

“They understand a shift to digital currencies won’t happen overnight. However, it is a part of a generational change being driven by people who have grown up with technology and see the world in a different way,” he said.

“Over thousands of years, money has always evolved and most central banks would agree that the current international monetary system is now out of date.”

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