Central bank digital currencies could spark a wave of new, non-bank players in retail payments and shake up the sector, the Bank for International Settlements said on Wednesday.
Major central banks have stepped up efforts to develop their own digital currencies, known as CBDCs, to modernize financial systems, ward off the threat from cryptocurrencies and speed up domestic and international payments.
Most efforts are still at the drawing board, with the Bank of England among those urging collaboration with the private sector. The People’s Bank of China’s plans for a digital yuan are the most advanced.
“One goal is to build an infrastructure that allows for more competition, which may mean more payment providers,” said BIS General Manager Agustín Carstens in a speech in Basel.
“One outcome is that a flood of new players could ‘disrupt markets’,” he said, according to a text of his remarks.
The prospect of billions of people across the world using the planned Facebook-backed Diem, formerly Libra, has spooked central banks about the potential risk to financial stability and their control over monetary policy.
Diem is a so-called stablecoin, a type of cryptocurrency designed to avoid the volatility typical of digital tokens such as bitcoin and thus become more practical for payments and commerce.