China proposes global rules for central bank digital currencies
LONDON (Reuters) – China on Thursday proposed a number of global rules for central bank digital currencies, from how they are used around the world to highly sensitive issues like surveillance and information sharing.
Global central banks are considering developing digital currencies to modernize their financial systems, ward off the threat of cryptocurrencies like Bitcoin, and speed up domestic and international payments. China is one of the most advanced in its endeavors.
Mu Changchun, Director General of the Institute for Digital Currencies of the PBOC, presented the new proposals at a seminar organized by the Bank for International Settlements.
“Interoperability should be enabled between CBDC (central bank digital currency) systems from different jurisdictions and exchanges,” said Mu. The PBOC shared the proposals with other central banks and monetary authorities, he said.
“Information flow and cash flow should be synchronized to make it easier for regulators to monitor transactions for compliance”
“We also propose a scalable and monitored forex platform supported by DLT (Distributed Ledger Technology such as Blockchain) or other technologies.”
With digital currencies like Bitcoin gaining traction with mainstream businesses and investors and private efforts like Facebook-backed Diem seek approval, it is up to central banks to accelerate digital cash issuance plans to avoid threats to their control to fend off the money.
The PBOC aims to become the first major central bank to issue a CBDC to internationalize the yuan and reduce reliance on the dollar-dominated global banking system. [nL4N2H72KY]
The European Central Bank is also looking into introducing a digital euro within the next five years. However, it meets with resistance from Germany, where the Bundesbank fears that a digital euro could harbor risks for banks.
A CBDC that is widely accepted in international trade and payments could ultimately undermine the status of the dollar as the de facto currency of world trade and undermine the influence of the US, say many analysts.
Federal Reserve chief Jerome Powell said it was more important for the Fed to get its approach to a digital dollar right rather than taking the lead. Still, he expects this year to be an important one to get the ball rolling.
China separately said Thursday it would accelerate pilot programs to develop its digital yuan to stimulate consumption to support economic growth.
Mu added that an important global rule should be a “fair supply of digital currencies” by the world’s central banks in order to continue to support the healthy development and financial stability of the international monetary system.
A “digital currency provided by one central bank should not affect the ability of another central bank to fulfill its mandate for monetary and financial stability,” he said.
Graphic: Digital currencies of central banks around the world –
Reporting by Tom Wilson and Marc Jones