Tuesday 8 January 2019 2:40 pm

Central banks moving 'cautiously' towards digital currencies

Around 70 per cent of central banks are researching how to use digital currencies, according to the Bank for International Settlements (BIS), however they are “proceeding cautiously” with plans.

Almost a quarter of the 63 survey participants have or will soon have the authority to issue a central bank digital currency (CBDC), the research found.

However more than 85 per cent of central banks said they were unlikely to issue any type of digital currency in the short term.

The research found that most central banks are “conducting research” and “many are progressing from conceptual work into experimentation and proofs-of-concept, including in cooperation with other central banks.”

Read more: Central banks 'could issue bitcoin-style digital currencies'

“Different central banks will continue to move at different speeds. This creates a potential risk for spillover effects across borders,” the report said.

“However the evidence from this survey is that central banks are proceeding cautiously, and also that they are collaborating and sharing the results of their work.

“Caution and collaboration will reduce the likelihood of unintended consequences.

“To meet the payment needs of the future, physical cash is unlikely to be the main answer. Yet, most people will have to wait to use a CBDC.

“However, central banks are working hard to make sure the wait is worth it.”

BIS, which is the “bank for central banks”, surveyed 63 central banks that represent jurisdictions covering close to 80 per cent of global population.

The industry body defined CBDCs as a new variant of central bank money different from physical cash or central bank reserve or settlement accounts.

In November, International Monetary Fund managing director Christine Lagarde said central banks should consider the possibility of issuing digital currency.

Speaking at an event in Singapore Lagarde said: “There may be a role for the state to supply money to the digital economy”.