BIS Gives Full Support to Central Bank Digital Currencies in its Report

Jafrin  |  Jun 24, 2021

The Bank for International Settlements (BIS), often called the central bank to the world’s central banks, has given its full backing to the development of central bank digital currencies (CBDCs).

BIS Latest Report Includes a Chapter on Central Bank Digital Currencies

The Bank for International Settlements (BIS), which acts as a bank to the world’s central banks published an extensive report on 23rd June on central bank digital currencies (CBDCs).

As part of a chapter from its annual report, the BIS highlighted the importance of launching CBDCs with a condemnation of cryptocurrencies and private digital money backed by large technology firms that “tend to work against the public good element that underpins the payment system.”

Per the report, CBDCs would function best as part of a two-tier system where the central bank would operate the core of the system, while the private sector, such as banks and payment service providers, would develop innovative use cases to serve customers.

Central banks are better at dealing with price stability, data ownership, and accessibility issues that will inevitably arise as digital payments become more widespread argued BIS.

BIS Not Friendly Towards Crypto

Unlike cryptocurrencies, CBDCs would likely be held in accounts tied to digital identities, meaning that payments would not be anonymous while protecting the payment system against money laundering and financial crime.

Previously, the BIS had argued against bitcoin and other cryptocurrencies dismissing them as speculative assets and a poor means of payment owing due to their price volatility, slow transaction times, and high energy usage.

At the same time, Head of research and economic advisor Hyun Song Shin, dismisses the role of cryptocurrencies, in the report, saying:

"By now, it is clear that cryptocurrencies are speculative assets rather than money, and in many cases are used to facilitate money laundering, ransomware attacks, and other financial crimes. Bitcoin, in particular, has few redeeming public interest attributes when also considering its wasteful energy footprint."

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