The governors of the European Central Bank (ECB), Bank of Japan and central banks of the United Kingdom, Canada, Sweden and Switzerland will all meet in Washington at an International Monetary Fund (IMF) conference in mid-April 2020 to discuss the matter of Central Bank-issued Digital Currencies (CBDC).
CBDCs started surfacing after the announcement of Facebook’s project Libra. The latter was immediately hit by regulatory concerns from governments from all around the world including the United States, France and India. China viewed it as a threat to its national currency, as the latter would be heavily influenced by the US dollar, and accelerated their work on the issuance of a CBDC.
Since then, major Central Banks from around the world have started considering the issuance of CBDC for their benefits. Even the Federal Reserve has begun considering such an endeavour as Governor Lael Brainard mentioned in their speech in late 2019: ”Given the dollar’s important role, it is essential that we remain on the frontier of research and policy development regarding CBDC”; and in regards to the benefits offered by digital currencies: “In the United States, there are compelling advantages to the current system”.
The main benefits to CBDC would be a much higher efficiency as well as cheaper costs. Nonetheless, with every great opportunity comes great responsibility and CBDCs are no different. Therefore, the six central banks will be meeting to discuss running join research to overcome potential issues such as cyberattacks and cross-currency settlements.
It is important to note that CBDCs are different from cryptocurrencies and each is a separate entity. The only resemblance is that they both leverage the power of blockchain technology.
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