Global Citizens Call For ‘a Global Unit of Account,’ Says Central Bank
Central banks in the Eurozone are increasingly turning their attention to the matter of digital fiats as they hurry to meet the needs of citizens who are more and more reluctant to use conventional cross-border payment solutions. But could their Central Bank-issued Digital Currency (CBDC) drives open an unexpected gateway for mainstream Bitcoin (BTC) and altcoin acceptance?
According to a study by Lithuania’s central Bank of Lithuania, which has analyzed research carried out by central banks the world over, the bank appears to conclude that CBDC interoperability and multicurrency CBDC initiatives could be worth pursuing.
The report’s authors write,
“Single-jurisdictional level initiatives are not capable of meeting a global citizens’ need for a safe, trustworthy, and cost-efficient instrument for cross-border payments […] Modern-day technology seems to be able to address this need. […] The issue, including the idea of multicurrency CBDC deserves deep joint analysis.”
But in their efforts to develop “safe, trustworthy, and cost-efficient instruments for cross-border payment solutions” for “global citizens,” it would seem that any CBDC initiative following the report’s lead might end up creating something not unlike existing decentralized cryptocurrencies.
The bank does not discuss whether the most popular, decentralized cryptocurrency, Bitcoin, might meet a global citizens’ needs, only saying that “the rise of Bitcoin, the interest in Libra idea suggests that today’s society calls for a global unit of account.”
“Indeed, with the development of global supply chains, and international trade, constantly growing e-commerce, and 3.3% of global population living outside of the country of origin (United Nations Population Fund 2015), the need for a universally acceptable and convenient unit of account seems evident. Therefore, the researches of CBDC and related ideas need to not lose sight of the ultimate goal while discussing technical details,” they said.
Meanwhile, the bank has found that most CBDC research thus far has “focused on the assessment of CBDC need and implications for a single jurisdiction,” with “limited” work currently being done on cross-jurisdictional CBDC effects.
But, as cross-border payments are one of the chief pain points driving central banks’ CBDC initiatives, a globally coordinated, cross-jurisdictional approach would arguably make more sense for all involved.
Although the report ends on a somewhat non-committal note, its authors appear to hint that CBDC issuances may one day become inevitable.
The bank writes, in its conclusion,
“The benefits of having a widely accessible risk-free medium of payment are […] straightforward.”
Meanwhile, in a recent document titled Innovation and its impact on the European retail payment landscape, the European Central Bank (ECB) said it will “continue to assess the costs and benefits of issuing a CBDC that could ensure that the general public will remain able to use central bank money even if the use of physical cash eventually declines. Prospects of central bank initiatives, however, should neither discourage nor crowd out private market-led solutions for fast and efficient retail payments in the euro area.”
However, insiders at the ECB told the Financial Times that the bank has no laboratory working on a digital euro and little intention to create one any time soon. “Most of these comments [about the digital fiat] seem designed to jolt the private sector banks into improving the inefficient, costly and time-consuming world of cross-border payments,” as reported.
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