Crack On With Digital FX, Ex-ECB Official Tells Central Banks

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Central banks need to press ahead with developing their own e-currencies or risk being overtaken by a world going digital, according to the Bank for International Settlements. 

Benoit Coeure, a former European Central Bank rate setter who now runs the BIS’s Innovation Hub, said the ultimate goal of a central bank digital currency (CBDC) should be to preserve the best elements of today’s system while permitting future innovation. New payment services providers could possibly crowd out commercial banks, he said. 

“We should roll up our sleeves and accelerate our work,” Coeure said at a financial forum in Ljubljana, Slovenia, on Friday. “CBDCs will take years to be rolled out, while stable coins and crypto assets are already here. This makes it even more urgent to start.” 

Monetary policy authorities around the world are looking into whether they should issue their own e-currencies, though El Salvador’s experience with making Bitcoin legal tender highlights how tricky the task can be. 

The People’s Bank of China could be the first major central bank to issue a digital version of its currency, the yuan, seeking to keep up with -- and control of -- a rapidly digitizing economy.  

But Sweden, long considered at the vanguard of the movement, earlier this year learned that its once-pioneering vision for a CBDC might take a lot longer to enact than initially thought. 

After once suggesting it might be ready to move ahead with an e-krona by 2018, the Riksbank now says the current pilot project won’t be completed until early next year, and has even given itself room to continue trying until the end of 2026.

“Central bank money has unique advantages -- safety, finality, liquidity and integrity,” Coeure also said. “As our economies go digital, they must continue to benefit from these advantages.” 

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