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UPDATE 1-Central banks join forces to look at future digital currencies

Tue, 21st Jan 2020 12:44

(Adds details)

By Andy Bruce and Francesco Canepa

LONDON/FRANKFURT, Jan 21 (Reuters) - Major central banks are
looking at the case for issuing their own digital currencies,
the Bank of England and European Central Bank said on Tuesday,
amid a growing debate over the future of money and who controls
it.

The central banks of Britain, the euro zone, Japan, Sweden
and Switzerland will share experiences in a new group headed by
former European Central Bank official Benoit Coeure and assisted
by the Bank of International Settlements, they said.

Central banks across the world have quickened the pace with
which they are looking at issuing their own digital currencies
in the wake of Facebook's push to launch Libra.

Of major central banks, China's has emerged as the
frontrunner in the drive to create its own digitised money,
though details of the project are still scarce.

"The group will assess ... economic, functional and
technical design choices, including cross-border
interoperability; and the sharing of knowledge on emerging
technologies," the central banks said in a statement.

CBDCs are traditional money, but in digital form, issued and
governed by a country's central bank. By contrast,
cryptocurrencies such as bitcoin are produced by solving complex
maths puzzles, and governed by disparate online communities
instead of a centralised body.

The common denominator is that cryptocurrencies and CBDCs,
to a varying degree, are based on blockchain technology, a
digital ledger that allows transactions to be recorded and
accessed in real time by multiple parties.

Last year BoE Governor Mark Carney took aim at the U.S.
dollar's "destabilising" role in the world economy and said
central banks might need to join together to create their own
replacement reserve currency.

The best solution would be a diversified multi-polar
financial system, something that could be provided by
technology, Carney said.

Facebook's Libra was the most high-profile proposed digital
currency to date but it faced a host of fundamental issues that
it had yet to address, he added.
(Additional reporting Thomas Wilson
Editing by William Schomberg)

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