BIS Cautions C-Banks on Hasty Crypto Issuance
Basel-based Bank for International Settlements, the institution facilitating co-operation among central banks, has concluded that its members should think long and hard before issuing their own cryptocurrency.
The Bank for International Settlements (BIS) believes that central banks should not hurry to issue their own cryptocurrency, focusing first on weighing the risks and spillovers. This emerged as the key conclusion in the Monday report published by the BIS, an organization that brings together about 60 central banks worldwide, including the US Fed and the European Central Bank (ECB).
Jacqueline Loh, head of the BIS markets committee, said:
“There are risks we do not fully understand at this point. Any step towards a possible launch of a CBDC (Central Bank Digital Currency) should be subject to careful and thorough consideration.”
It should be noted that Loh is also deputy managing director of the Monetary Authority of Singapore (MAS), which itself has initiated a project that could lead to the creation of a Singapore cryptocurrency.
Benoit Coeure, who leads the BIS Committee on Payments and Market Infrastructures, said:
“General-purpose central-bank digital currencies could revolutionize the way money is provided and the role of central banks in the financial system, but these are uncharted waters.”
The report says that CBDCs could influence deposits, which represent a significant capital source for commercial banks. The situation could have an immediate impact on financial stability at times of market tension.
The BIS could not find any evidence that digital currencies would help central banks better adopt the decided monetary policies.
So far, no central bank has issued its own digital currency. However, some of them are seriously considering such a move. Sweden’s Riksbank is exploring a retail e-krona for micropayments. Sweden has let it be known that it wants to become a cashless society.
Even though the BIS offers no praise for cryptocurrencies, it has positive comments on the technology backing them. It says that blockchain could streamline the trade settlements of stocks and forex pairs.
The same opinion was voiced by Bank of England Governor Mark Carney, who said that Bitcoin had failed as money but blockchain was great.
The BIS report came just before the meeting of G20 representatives, who are scheduled to convene next week in Buenos Aires, Argentina.
G20’s Financial Stability Board, which is led by Carney, is expected to report on the cryptocurrency market.