BIS puts CBDCs at centre of future monetary system
The report decries the structural limitations of crypto and decentralised finance (DeFi), outlining the inherent risks in their design. The BIS notes that recent market turmoil and the collapse in the prices of major stablecoins are reminders that "crypto is not sound money".Rather, a digital version of money issued by the central bank could provide for many of the same features offered by cryptocurrencies and stablecoins while building on a strong foundation of trust.
With a sovereign currency at its core, the BIS believes CBDCs can avoid the structural limitations and risks of crypto, which include congestion, high fees, fragmentation and pseudo-anonymity.Hyun Song Shin, economic adviser and head of research of the BIS, states: "The BIS argues that the future monetary system should be the fusion of new capabilities around the core of trust provided by the central bank. The private sector will provide customer-facing activities with new functions such as the tokenisation of money and financial instruments and instant retail payments through new interfaces.
This combination could bring about lower costs, greater financial inclusion, more user control over financial data, improved integrity and seamless cross-border activity, helping to overcome shortcomings in today's arrangements. Such innovations could open a new chapter in the global monetary system." In the cross-border context, the BIS Innovation Hub (BISIH) has been leading practical experiments to show how central bank digital currencies (CBDCs) could help deliver faster, cheaper and more transparent international payments.In its latest update, the BIS states that the experiments demonstrate that common systems encompassing multiple CBDCs are operationally
. Read more on finextra.com
