The Bank for International Settlements (BIS) Innovation Hub has released a report on the lessons learned from its CBDC experiments. The report finds that wholesale CBDCs will be driven by the public and private sector’s quest to shape the future of trading and settlement. Retail CBDCs, on the other hand, are a complex undertaking, and not only for the central banks. The Hub’s projects focus on individual aspects of retail CBDCs to shed light on these complexities, such as the most promising CBDC model, a two-tier model with public-private partnership; the most fundamental feature, privacy; and the greatest challenge, cyber security (Full report – https://www.bis.org/publ/othp73.htm).
The report also finds that cross-border CBDC arrangements are novel territory, and more complicated than their domestic counterparts. Common platforms are likely to have more upside and bring potential operational efficiencies compared with current arrangements, but hub-and-spoke designs provide more flexibility for domestic systems and are thus easier to contemplate at least in the short run.
The report concludes by stating that by leveraging new technologies, central banks can provide new solutions to many “old” operational challenges and policy questions.
“The BIS Innovation Hub’s CBDC experiments have provided valuable insights into the potential benefits and challenges of these new technologies,” said Claudio Borio, Head of the BIS Innovation Hub. “We believe that this report will be a valuable resource for central banks and other stakeholders as they continue to explore the potential of CBDCs.”
The BIS Innovation Hub is a network of innovation labs hosted by central banks around the world. The Hub’s mission is to explore the potential of new technologies to improve the efficiency, resilience and safety of the global financial system.
The Hub’s CBDC experiments have been conducted in collaboration with central banks, financial institutions, technology companies and other stakeholders. The experiments have focused on a variety of topics, including the design of CBDCs, the impact of CBDCs on financial stability, and the use of CBDCs for cross-border payments.
The BIS Innovation Hub’s report on the lessons learned from its CBDC experiments provides valuable insights into the potential benefits and challenges of these new technologies. The report will be a valuable resource for central banks and other stakeholders as they continue to explore the potential of CBDCs.
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