The Bank of England is teaming up with central banks across the globe to consider an opportunity to develop its own central bank-backed cryptocurrency.
The UK bank will meet with top banks in Japan, Switzerland and the EU, as well as the Bank of International Settlements (BIS) to weigh up the pros and cons of creating a new cryptocurrency backed by the central banks, it was announced this week.
The group – which consists of the Bank of England, the Bank of Canada, the Bank of Japan, the European Central Bank, the Sveriges Riksbank, the Swiss National Bank and the BIS – will examine the risks and benefits of embracing a bitcoin-style digital currency.
“The group will assess CBDC use cases; economic, functional and technical design choices, including cross-border interoperability; and the sharing of knowledge on emerging technologies,” it said on Tuesday.
“It will closely coordinate with the relevant institutions and forums – in particular, the Financial Stability Board and the Committee on Payments and Market Infrastructures (CPMI)”.
CBDC stands for central bank digital currencies.
The group will be co-chaired by BIS Innovation Hub head Benoît Cœuré and Bank of England deputy governor and CPMI chair Jon Cunliffe.
The Bank of England certainly isn’t the first central bank to look into the potential benefits of adopting a CBDC.
The European Central Bank – along with board member Cœuré – has previously showed interest in introducing a digital currency, while China plans to launch its own cryptocurrency next month. These latest discussions come seven months after Facebook announced its own plans to release a cryptocurrency called Libra.
The company originally claimed that Libra would be more stable than rival digital currencies as the currency would be linked to “a collection of low-volatility assets”, including bank deposits and government securities from reputable central banks.
However, Facebook has repeatedly faced setbacks and criticism from far and wide, including financial regulators and President Trump. Even Cœuré himself has warned of the affect Libra could have to global stability.
And then there’s the Libra scams that were spotted only a month after Libra was unveiled, despite the fact Facebook has no plans to release the currency until later this year.
It seems we’ll have to wait until discussions are over to find out whether the Bank of England think the benefits of a central bank-led cryptocurrency are worth the risks – or the backlash – that Facebook has received.