In a press release this week, The Bank For International Settlements (BIS) has warned that “Central banks must carefully weigh the implications for financial stability and monetary policy of issuing digital currencies.”
The press release coincides with the issuing of a 34 page report from the Committee on Payments and Market Infrastructures (CPMI) and the Markets Committee which focuses on central bank-issued digital currencies (CBDC) and their implications for payments, monetary policy and financial stability.
Distributed Ledger Technology for Fiat Currencies?
It does not touch upon decentralised digital currencies such as Bitcoin but rather centralised ones issued through the current central banking system and considers a wholesale crypto-currency limited just to select financial institutions along with a separate, general purpose crypto-currency rendered accessible to the public.
The report crucially finds that, whilst any centrally issued digital currency may affect the transmission of money, “ … the basic mechanics of monetary policy implementation” of fiat currency through the central banks would not be altered.
Mark Carney, Governor of the Bank of England, Chair of the BIS Global Economy Meeting, Chair of the Financial Stability Board and a recent critic of decentralised currencies, said the report had raised issues that the central banks and society in general need to carefully consider.
Mr Carney is keen to investigate the technology behind cryptocurrencies as “developments have raised questions about the feasibility and desirability of combining distributed ledger technology with the trust inherent in fiat currencies to create a central bank digital currency available to all.”
The BIS was established in 1930 and includes 60 national central banks, representing countries from around the world that together make up about 95% of world GDP.
From it’s head office is in Basel, Switzerland it purports to be “facilitating collaboration among central banks” and is widely seen as being the guiding hand behind global monetary policy. The heads of the respected central banks are also members of the BIS and enjoy the same diplomatic immunity as the BIS itself.