I am alerting readers to a new report jointly issued by the OMFIF (Official Monetary and Financial Institutions Forum) on the status of future prospects for a retail version of a Central Bank Digital Currency.
We have covered this topic for some time. This new report is in line with what we have reported here. It suggests that we may see some central banks try out a retail version of a central bank digital currency sometime in the next 3-5 years. The report does note that due to emergence of such things as Project Libra from Facebook, there has been a shift in focus at some central banks from the concept of a "wholesale" digital currency (used just by financial institutions) to a "retail" version (used by the general public).
Below I have pasted in the conclusion section of the report to give readers a summary view of it. You can access the full report by
going here and providing email information. (I added bold below for additional emphasis)
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Advent of a retail
CBDC expected
within five years
"IN THIS report we have set out – with help from the global
policy-makers who participated in our survey, to whom we owe
a debt of gratitude – current central bank perceptions of the
advent of disruptive financial technologies and the possible
introduction of central bank-issued digital currencies. Policymakers’ assessments are many and varied, and depend much
on their economies’ size and monetary policy objectives.
But one thing is certain: regulators will not sit idly by as new
systems pose potentially severe threats to existing structures.
Policy-makers dare not risk being left behind as the technology
continues to advance.
The principal conclusion is that we are likely to witness
the introduction of a central bank – that is fiat – retail digital
currency within the next five years, either as a complement
to or as a substitute for notes and coins. It is improbable that
the first such issuance will come from a G20 central bank;
it is considerably more likely to be launched in a smaller
and less complex economy in response to a specific policy
objective and use case.
This may relate to improving the overall
effectiveness and resilience of a national payments system
by reducing the prevalence of cash. Alternatively, it could be
associated with extending financial inclusion; reducing the
size of the dark economy; countering financial crime; or for
a specific purpose, such as transforming the cross-border
transmission of migrant worker remittances.
In most instances, the development is most likely to be
nationally driven, but increasing co-operation and collaboration
between monetary authorities are likely to become the norm.
There will be no ‘one size fits all’ solution, and we expect to
see the emergence of several different models, use cases
and approaches, some perhaps even in direct intellectual
competition with one another.
Although the primary drivers of these initiatives will be
central banks and associated national authorities, we anticipate
extensive private-public sector partnerships wherein the private
sector provides or indeed runs technology, infrastructure and
operations on an outsourced or more deeply collaborative
basis. We believe there will be a growing number of studies,
use cases and pilot programmes as both sectors explore,
design and test the art of the possible and desirable. We note,
however, that these initiatives will be driven by policy and not
technology.
It remains unclear whether blockchain technology
or its analogues are the best route forward for digital currency
implementation, and central banks by and large are technology
agnostic. Ideally, they will settle on their precise policy objectives
and then find the most appropriate technological solution, rather
than be wedded to a specific technology beforehand.
We do not envisage privately-issued digital currencies
gaining significant traction or acceptance in a universal
context, although there may be closed private networks in
which they operate. The determination of national governments
to protect the monopoly enjoyed by fiat currency, and the
commitment of regulators to financial stability, will in our view
raise insuperable hurdles to the establishment of a private
digital currency as a significant means of exchange, however
gilt-edged its asset backing. Pure, unbacked cryptocurrencies
such as bitcoin will remain the minority pursuit of speculators
and denizens of the dark web.
Our hope is that this report will serve policy-makers, industry
specialists, economic commentators, scholars and the general
reader as a useful companion to the impending and all-but certain changes to retail payments systems. We at OMFIF and
IBM welcome comments, affirming or otherwise, and look
forward to charting the future of central bank digital currencies
in further studies and through our continuing dialogue with
policy-makers the world over."
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My added comments: Please note that this summary conclusion is very much in line with what we have been reporting here for some time. Change is more likely to evolve gradually over time without some kind of new major crisis to prompt sudden change.
We have made all the following points noted above here on this blog for some time:
- There is no current new "universal global digital currency" ready to deploy at the global level at this time waiting in the background behind the scenes at the IMF or anywhere else
- Blockchain is mostly just a buzz word so far and by no means has been adopted by central banks or the IMF as a preferred future technology
- Central Banks (and national governments) will do whatever they have to do in order to protect the monopoly status of their fiat currencies. Some may partner with private enterprises, but it will on terms dictated by the Central Banks.
- While the concept of "global cooperation" is always mentioned, the reality is that these potential initiatives by central banks are going to start off at the national level and will more likely compete with each other instead of introducing some new universal global central bank digital currency. Here is how the summary above puts it:
"In most instances, the development is most likely to be nationally driven, but increasing co-operation and collaboration between monetary authorities are likely to become the norm. There will be no ‘one size fits all’ solution, and we expect to see the emergence of several different models, use cases and approaches, some perhaps even in direct intellectual competition with one another."
All of this is in agreement with the input we have received here from experts on this topic that we have mentioned many times. This report once again confirms the accuracy of the input provided us and what we have been reporting here on this blog. This what we
just reported in October from KlickEx CEO Robert Bell:
"As far as real systemic change... There's nothing on the cards for the monetary system. The digital services spoken of (in the Bloomberg article) will not change anything fundamental, and the IMF and BIS are even further behind where most central banks are.
The central banks will implement real time slowly, and banks will reduce cross border prices slowly.
Swift and their GPI project is already doing this work, but banks are taking a long time to reduce prices, that's all.
Open Banking, is speeding things up a bit, but not much." ---- Robert Bell (KlickEx)
As you can see, this process is more likely to unfold over many years rather than something we would see imminently and no universal digital currency or the technology to implement such a thing has been chosen thus far.
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Added note: China's President wants to China to take a leading role in the future of blockchain technology. This will be yet another competing effort rather than some kind of universal global effort. It is clear from the context of the speech that China wants to be in control of the technology used rather than any institution outside of China. We might call this a "China First" initiative on their part.
