According to Reuters, the Bank for International Settlements (BIS) warned Central Banks on the risks before issuing their own cryptocurrency in a report. Two committees at the BIS, which have members from the U.S. Federal Reserve and European Central Bank are concerned for central banks issuing their own CBDC or central bank digital currency.
“There are risks we do not fully understand at this point,” said Jacqueline Loh, chair of the BIS markets committee. “Any step towards a possible launch of a CBDC should be subject to careful and thorough consideration,” added Loh, deputy managing director of the Monetary Authority of Singapore.
Financial stability in times of stress could be more vulnerable. The report states that blockchain or distributed ledger technology (DLT) that carries cryptocurrencies could settle trades of securities and forex more efficient. “DLT is where the action is,” said Coeure, an ECB executive board member.
Governor Mark Carney of Bank of English stated that CBDC needs careful consideration, a new method to use the new technologies to fill the current demand for reliable, real-time payments.
Although this report was released at a time where cryptocurrencies such as Bitcoin have huge volatility, this has not affected the price swings. “It’s clearly a learning curve and regulators across the world have addressed what are the immediate risks created by private digital tokens,” Coeure said. The priority lies with anti-money laundering and terrorist financing safeguards, where cryptocurrencies underlying the futures markets would come later, Coeure said.
“So any discussion in the G20 next week will be likely to be forward looking, discussing the pros and cons of regulation, but don’t expect concrete action, it’s more about comparing experiences so far,” Coeure said.