Hard money is falling apart. Digital currency is the new trend that these banks are working on incorporating it in their financial transactions. This is all being done to bring in more digitalization into action after Facebook launched its own Libra currency which was made to act like a digital currency. Users would be able to store money in that digital currency, therefore Facebook would be becoming an alternative to bank accounts.
The Libra movement caused these 6 central banks to form a group to work collaboratively on digital currency module and formed the Central Bank Digital Currency group CBDC where central banks of UK, Japan, Canada, Sweden, Switzerland, and the European Union joined their hands and planned to pool in their experience to assess the potential of digital currency and its effect on financial transactions.
The BoE Bank of England press release stated on January 21st that CBDC will be assessed thoroughly for growth in all aspects like economic, technical, cross border, interoperability, and others for the purpose of sharing knowledge on this emerging technology. Benoît Cœuré has been appointed as the new Head of Bank of International Settlements (BIS) Innovation Hub. He will be directly in contact and coordinating with Jon Cunliffe, Deputy Director for Bank of England (BoE).
The new Bank of International Settlements will be working intimately with the Committee on Payments and Market Infrastructures (CPMI) and the Financial Stability Board (FSB). The latter is the international body in existence that takes care of the standardization, safety, and efficient payments and settlements support.
These groups will perform the vital task of examining the possible threats of depending on the digital currency module. The move has been brought into action to target private currencies and examine threats and propose precautionary measures for inducing currencies like Libra that have been proposed to public by Facebook.
Christine Lagarde, Head of the International Monetary Fund in 2018 called on these central banks. She notes their serious exploration of the digital currency movement. Since then these six central banks have accelerated their R&D on digital currency and Blockchain.
2020 central bank digital currencies trends
Riksbank which is the central bank for Sweden has now announced that Accenture has became its new technology partner for the e-krona pilot project for Sweden. At the end of 2018, Sweden observed that there was a steady fall in cash involvement in transactions. E-krona test under the CBDC by Riksbank has made it very transparent. The launch of e-krona is still in pipeline and will be soon active.
The European Central Bank (ECB) has been observing and evaluating the use and comfort of introducing and issuing the digital currency module since 2019. They also gave approval on the research on digital currencies by central banks on their end. Since 2016 the ECB has been working collaboratively with Bank of Japan to perform collective research on how the digital currency can be penetrated in the global financial working structure. Their results concluded that the digital currency has a scope of penetration. There are certain measures that have to be taken into consideration for doing the same. Bank of Englandhas also been trying to incorporate the cryptocurrency in its financial movements many times
Blockchain is directing towards the movement of digital currency in the banking sector. This could be considered the right time to work on it as a growing number of central banks around the world are experimenting with this innovation.