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The irresistible rise of secure digital money (CBDC)

"9 out of 10 central banks are exploring central bank digital currencies (CBDCs), and more than half of banks are developing them or conducting concrete experiments. Some 40 central banks believe that secure digital money will work in their countries before six years."

"Nine out of ten central banks are exploring central bank digital currencies (CBDCs), and more than half of banks are developing them or conducting concrete experiments.”

Thus begins the introduction of central bank survey on safe money (CBDC) just published by the BIS.

When this blog was born in March 2018, no one could imagine that in a few years secure digital money (CBDC) would have become the subject of study by 90% of the central banks surveyed. Today, some 40 central banks think secure digital money will work in their countries within six years.

Nobody could imagine it, but it has happened. Today safe money is at the center of the money reform debate. As the BIS analyzes show, Most central banks have gone from ignoring or despising the idea of ​​issuing secure digital money that is accessible to all citizens to placing this reform within their plans.

And it's not just central banks. Digital public money has come to be studied by governments and parliaments.

In U.S. safe money is the essential element of money reform which is being studied by all public institutions related to the financial system. President Biden put it this way in his recent Executive Order"My Administration attaches the utmost urgency to research and development efforts into potential design and implementation options for a United States CBDC.”.

And Janet Yellen, the Secretary of the Treasury, reiterated it in his address to the American University : "Public money is the heart of a well-functioning financial system"

In Europe, the pioneering central banks - the Bank of England and the Bank of Sweden - continue to advance their work. the section of the Bank of England website dedicated to CBDCs It is a fundamental reference for the analysis of safe money. And the UK government got on board a year ago with the creation of the joint working group the Treasury and the Bank of England.

In the European Union it is only a year and a half since the European Central Bank published his first report on the digital euro and Parliament and the Commission have started studying it this year. noteworthy the report prepared by Brunnemeier and Landeau for Parliament and the video of your presentation at the CERP.

Central banks have realized the importance of using a safe asset as money to achieve stability. This is how the latest BIS report recognizes it: “Central banks say that financial stability has become more important as a motivation for their participation in CBDCs”.

On the other hand, in these four years it has not only been public and secure money (CBDC) that has become the focus of attention for the possible reform of money and banking activities. In parallel there has been a growing and spectacular development of the so-called cryptocurrencies. Last year in the United States Congress there have been 35 bills related to CBDCs and crypto assets.

From the point of view of its possible use as money, the most important development of cryptocurrencies has been that of the so-called Stablecoins which I have repeatedly commented on this blog. Today, when talking about the possibilities offered by safe money to provide stability to a monetary system that replaces the current one, it is not enough to mention the CBDCs but It is essential to analyze the contribution that stablecoins backed 100% with central bank money can make.

The BIS titles its report “Gaining Momentum”. And it is certainly of all the structural reforms undertaken in recent decades (telecommunications, air transport, the end of planned economies, etc.) none has passed with the acceleration that this reform of money, payments and the financial system is acquiring.

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About the Author

Miguel A. Fernandez Ordonez

Miguel A. Fernandez Ordonez

State economist. Former Governor of the Bank of Spain and member of the Governing Council of the European Central Bank (ECB). He currently teaches Seminars on Monetary Policy and Financial Regulation at IEUniversity.

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