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Pandemic pushes central bank digital currencies into top gear

Thu, 11th Jun 2020 16:18

By Huw Jones

LONDON, June 11 (Reuters) - The coronavirus pandemic is
accelerating the development of central bank digital currencies
(CBDCs) as it has prompted millions of people to turn to
cashless payments, central bank officials said on Thursday.

Central banks have been examining how CBDCs could become a
reality since Facebook's efforts to launch its Libra
cryptocurrency stablecoin raised the prospect of a private
sector social media giant competing with traditional currencies.

"There is little evidence that cash transmits the virus but
COVID-19 has caused an unprecedented experiment in
digitalisation across our lives," Benoit Coeure, head of the
Innovation Hub at the Bank for International Settlements, said.

"COVID-19 will be remembered by economic historians as the
event which pushed CBDC development into top gear," he told an
online event held by think tank CEPR and the London School of
Economics.

Coeure co-chairs a group of central banks working on the
"building blocks" of a CBDC and will report back in October.

Central banks will introduce CBDCs but in a cautious way to
avoid fragmenting the financial and monetary system, he added.

"There is no such thing as an off-the-shelf CBDC," he said.

Christina Segal-Knowles, executive director for financial
markets infrastructure at the Bank of England, said the pandemic
has accentuated an existing trend of shrinking use of cash.

Withdrawals from cash machines in Britain have plummeted
since the national lockdown to fight the pandemic began in March
as shops insist on contactless payments in some cases, she said.

The BoE has published a discussion paper on a potential
CBDC, whose uses could include cutting the cost of cross-border
payments like remittances, she said.

"We are actively exploring it given the potential
opportunities," Segal-Knowles told the event, adding it was
still unclear what impact a CBDC would have on the financial
system and implementation of monetary policy.

(Reporting by Huw Jones; Editing by Susan Fenton)

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