The Bank for International Settlements (BIS) has reaffirmed its support for central bank digital currencies (CBDCs).
In a report titled “CBDCs: an opportunity for the monetary system,” BIS researchers argued that sovereign digital currencies offered “the unique advantages of central bank money.”
According to the report, CBDCs are the embodiment of digital money designed for the public good and are best suited for interfacing with instant retail payment systems.
Indeed, several central banks around the world are experimenting with retail CBDCs with many of these projects examining ways to float a digital companion to their respective fiat currencies.
Detailing a probable retail CBDC architecture, the BIS report put forward the following: “CBDCs are best designed as part of a two-tier system, where the central bank and the private sector each play their respective role,” adding:
“A logical step in their design is to delegate the majority of operational tasks and consumer-facing activities to commercial banks and non-bank PSPs that provide retail services on a competitive level playing field. Meanwhile, the central bank can focus on operating the core of the system.”
On the subject of privacy concerns, the BIS researchers argued in favor of robust customer identification protocols. According to the report, a token-based CBDC with complete anonymity features would provide avenues for illegal financial activities.
Instead, the BIS said central banks should design account-based CBDCs that interface with already existing digital identity infrastructures such as tax records, property registries, and education certificates, among others.
Account-based CBDCs with associated digital identity systems mean there will likely be a need for a dedicated entity tasked with identity verification and user data protection.
Read more: https://cointelegraph.com/news/bis-optimistic-about-central-bank-digital-currencies