In recent days, central banks from the around the world have been actively exploring the prospect of issuing digital currencies. The Bank of England (BOE) has continued to press forward with research into models for central bank-issued currencies, with BOE governor Mark Carney expressing his openness to the idea of issuing a digital currency in future. In other news, a report published by a International Monetary Fund (IMF) official has warned central banks that they must adapt to the innovations brought forward by cryptocurrencies. Lastly, Hong Kong’s acting secretary for financial services and the treasury has indicated that the Monetary Authority “has no plan to issue [central bank-issued digital currency] at this stage but will continue to monitor […] international development.”
IMF Official Authors Report Discussing Central Bank-Issued Digital Currencies
An article authored by the IMF’s Monetary and Capital Markets Department deputy director, Dong He, has argued that cryptocurrencies may have a negative impact on demand for central bank money in future, and that central banks must be adaptive of the changing financial landscape brought about by cryptographic assets.
The article asserts that “Crypto assets may one day reduce demand for central bank money,” adding that central banks should consider implementing measures to “forestall the competitive pressure crypto assets may exert on fiat currencies” and make fiat currencies “more attractive for the digital age.”
Mr. He argues that “Central banks must maintain the public’s trust in fiat currencies and stay in the game in a digital, sharing, and decentralized service economy. They can remain relevant by providing more stable units of account than crypto assets and by making central bank money attractive as a medium of exchange in the digital economy.”
The article adds that “government authorities should regulate the use of crypto assets to prevent regulatory arbitrage and any unfair competitive advantage crypto assets may derive from lighter regulation. That means rigorously applying measures to prevent money laundering and the financing of terrorism, strengthening consumer protection, and effectively taxing crypto transactions.”
Bank of England’s Research Into Central Bank Cryptocurrencies Progressing
Officials from the Bank of England have reportedly made a “material step forward” in their research regarding different models for central-bank issued currencies.
Whilst the BOE has sought to assure that it currently holds no plans to develop and issue a digital currency, Bank of England governor, Mark Carney, recently expressed that he is open-minded regarding the prospect of a central bank-issued cryptocurrency whilst speaking in Stockholm. Despite the comments, Mr. Carney stated that any development of a central bank-backed virtual currency would not be occurring in the near future
“[T]he future of central banking may involve fewer central bankers,” Mr. Carney said.
Hong Kong Monetary Authority Dismisses Issuing Central Bank Crypto
Mr. Joseph Chan, the acting secretary for financial services and the treasury, recently dismissed the prospect of issuing a central bank digital currency (CBDC) whilst asking a question in parliament.
Mr. Chan stated that the Hong Kong Monetary Authority (HKMA) “has carried out research on CBDC. At the same time, the HKMA notes that the benefits of CBDC and its efficiency gains will depend on the actual circumstances of a jurisdiction. In the context of Hong Kong, the already efficient payment infrastructure and services make CBDC a less attractive proposition. The HKMA has no plan to issue CBDC at this stage but will continue to monitor the international development.”
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