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RPT-Central banks sketch out digital currency as China forges ahead

Fri, 9th Oct 2020 14:35

(Repeats to additional subscribers, text unchanged)

By Huw Jones and Tom Wilson

LONDON, Oct 9 (Reuters) - A group of seven major central
banks including the U.S. Federal Reserve set out on Friday how a
digital currency could look like to help catch up with China's
"trail blazing" and leapfrog private projects like Facebook
Inc's Libra stablecoin.

The central banks and the Bank for International Settlements
(BIS), said core features should include resilience,
availability at low or no cost, appropriate standards and clear
legal framework, and an appropriate role for the private sector.

Bank of England (BoE) Deputy Governor and chair of a BIS
committee on payments Jon Cunliffe said the rise in cashless
payments since lockdowns to fight the pandemic has accelerated
how technology is changing forms of money.

Central banks began looking closely at digital currencies
after Facebook last year announced its yet-to-be-launched
digital token Libra that would be backed by a mixture of major
currencies and government debt. The body behind Libra has since
tweaked plans and now hopes to launch several "stablecoins"
backed by individual currencies.

Central banks need to keep up to avoid the private sector
plugging payments gaps in unsuitable ways, Cunliffe said.

Besides the Fed and the BoE, the seven central banks that
have teamed up with the BIS include the European Central Bank,
the Swiss National Bank and Bank of Japan, but not the People's
Bank of China.

China is already piloting a digital renminbi, with the PBOC
saying it would boost the yuan's reach in a world currently
dominated by the dollar.

Japan's top financial diplomat, Kenji Okamura, said on
Thursday that China was seeking to win a first-mover advantage
in building its own digital currency, warning it was "something
we should be afraid of".

"I don't think this is a race between central banks,"
Cunliffe said, adding that no one central bank digital currency
(CBDC) answer was going to dominate the whole world.

Benoit Coeure, head of innovation at the BIS, said there was
no international race, but there was an advantage for central
banks to quickly catch up with the private sector and get ahead
of the curve to shape the future.

The International Monetary Fund could play an important role
in dealing with any cross-border "spillovers" from a national
CBDC, Coeure said.

(Reporting by Huw Jones and Tom Wilson, editing by Emelia

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