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Bank of England and Five Other Major Central Banks Join Forces on Digital Currency

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As of now, the explorations and considerations of central bank digital currencies (CBDC) has been done on a country-by-country basis.

According to a press release published by the Bank of England, Six central banks including the Bank of England, will assess whether there is a strong case for creating a CBDC in their respective countries.

The central banks of Canada, the United Kingdom, Japan, European Union, Sweden and Switzerland created a group with the Bank for International Settlements (BIS) to jointly research CBDC. They will share their experience with other group members as they study potential use cases for CBDCs in their respective jurisdictions.

CBDCs are traditional money, but in digital form, issued and governed by a country’s central bank. It is based on blockchain technology, a digital ledger that allows transactions to be recorded and accessed in real time by multiple parties.

According to the announcement, 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 research group will be co-chaired by head of the BIS Innovation Hub Benoît Cœuré and Jon Cunliffe, a Deputy Governor of the Bank of England and chair of the Committee on Payments and Market Infrastructure. The group will include senior representatives from the participating central banks and the BIS.

In August 2019, Bank of England Governor Mark Carney took aim at the U.S. dollar’s “destabilising” role in the world economy and said central banks might need to join together to create their own replacement reserve currency. In his words, the best solution would be a diversified multi-polar financial system, something that could be provided by blockchain technology,

China Already Ahead

While most of the other central banks are still discussing over CBDC is a good idea, the People’s Bank of China recently announced that it has completed the top-layer design and joint testing of the digital yuan. Similar to what has been seen with other central bank roadmaps, China would bring its digital yuan first to commercial banks and then to the clients and individual customers of those banks through digital wallets.

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