The Bank of England will be discussing the potential pitfalls and promises of a central bank digital currency (CBDC) in a key meeting of a group of global central banks being held today, 19 August. A focus group identified as The Official Monetary and Financial Institutions Forum (OMFIF) is set to host a virtual roundtable meeting where the Bank of England will be joined by Nemzeti Bank (the Central Bank of Hungary), the Swiss National Bank (the Central Bank of Switzerland), the ING Bank (a UK multinational financial and banking services headquartered in Amsterdam), and New York-based Cypherium blockchain platform.
Understanding Central Bank Digital Currencies
The focus group would examine the potential applications, benefits, and design of CBDCs (Central Bank Digital Currencies), which the Central of England has been increasingly exploring during this year.
The founding member of OMFIF and CEO of Cypherium, Sky Guo, said that when it comes to building the financial future, the importance of discussion regarding CBDCs should not be undermined. Guo stated: “With CBDCs still in their initial phase of conception, now is the time to debate the advantages and disadvantages of infrastructural ideas, especially related to how these instruments will interact and operate with each other.”
In a webinar event in July, Andrew Bailey, the governor of the Bank of England, said that they are looking at the question of whether they should create a Bank of England digital currency or not. The England central bank governor stated that they would continue looking at it as the CBDC has enormous impacts on the society and the nature of payments.
In June, the Bank of England also organized a consultation forum examining the potential for state-backed digital currency.
A state-backed cryptocurrency could provide multiple benefits. For example, adopting a national digital currency would bring several benefits for the Central Bank of England, especially around auditing and traceability.
Zurab Ashvil, who is the founder and CEO of L3COS that pitched a blockchain operating system to the Central Bank of England, said that such traceability would make various black-market financing acts, money laundering, or fraud impossible.
A central bank-issued digital currency could also help to address challenges caused by the coronavirus pandemic, especially because of concerns surrounding cash shortages and the rising demand for digital transactions.
Interest in CBDCs Surging
Central bank digital currencies have become a widely discussed topic in the recent few years, and the speed of the debate has gained pace recently. Over 80% of central banks in the world are believed to be engaged in exploring their potential. Such interests may have been influenced by private sector moves, especially the launch of Facebook’s Libra cryptocurrency. There has been rising fear that the tech giant’s Libra project could threaten monetary control held by central banks, forcing them to create their own CBDCs.
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