Central banks join forces to look at future digital currencies

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LONDON / FRANKFURT (Reuters) – Major central banks are studying the case of issuing their own digital currencies, the Bank of England and the European Central Bank said Tuesday, amid growing debate about the future of money and who controls it .

FILE PHOTO: A small toy figure is seen in the virtual currency representations on a European Union flag and the Facebook Libra logo in this illustrated image, October 20, 2019. REUTERS / Dado Ruvic / Illustration / Photo archive

The central banks of Great Britain, the Eurozone, Japan, Sweden and Switzerland will share experiences in a new group headed by former European Central Bank official Benoit Coeure and assisted by the Bank for International Settlements, they said.

Central banks around the world have accelerated the pace with which they seek to issue their own digital currencies following those of Facebook (FB.O) press to launch Libra.

From the main central banks, China has emerged as the leader in the campaign to create its own digitized money, although project details are still scarce.

“The group will evaluate … economic, functional and technical design options, including cross-border interoperability; and knowledge sharing on emerging technologies, “central banks said in a statement.

CBDCs are traditional money, but in digital form, issued and governed by a country’s central bank. On the contrary, cryptocurrencies such as bitcoin are produced by solving complex mathematical puzzles and are governed by disparate online communities rather than a centralized body.

The common denominator is that cryptocurrencies and CBDCs, to a greater or lesser extent, are based on blockchain technology, a digital accounting book that allows various parties to record and access transactions in real time.

Last year, the governor of the Bank of England, Mark Carney, pointed to the “destabilizing” role of the US dollar in the world economy and said that central banks may need to unite to create their own replacement reserve currency.

The best solution would be a diversified multipolar financial system, something that technology could provide, Carney said.

The Facebook Pound was the highest-profile proposed digital currency to date, but it faced a number of fundamental problems that it still had to address, he added.

Additional report by Thomas Wilson; Edition by William Schomberg

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