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COVID-19 heightens the age-long concern of the hygiene risk of cash. The U.S. Federal Reserve increased the minimum holding period to ten from five days for bills coming from overseas. Banks in China were ordered to disinfect cash before issuing it to the public. The Bank of Korea is putting currency notes through a high-heat process before releasing them for circulation. ‘There will be more outbreaks. That is not a maybe,’ said Alanna Shaikh, the global health consultant.
A long term alternative to physical cash now looks even more appealing, and people place more trust on central banks than payments service providers, commercial banks, credit card companies and technology companies to issue digital currency as reported by OMFIF in March.
Arrival of CBDC is imminent. The sequel to the BIS survey on CBDC found that 80% of central banks (up from 70%) are engaging in some sort of work. The March BIS Quarterly Review paper cited 17 retail CBDC projects or reports published before 19 February As examples of the latest efforts, the 2020. As examples of the latest efforts, the Bank of Canada is implementing an initiative to build, as a contingency, the capability to issue a cash-like CBDC to the public, should the need ever arise.
Central banks are also working together. The Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Sveriges Riksbank, Swiss National Bank and Bank for International Settlements have created a group to share experiences, asses use cases, design choices, share knowledge on technologies on CBDC. The appointment of the heads of the BIS Innovation Hub in Singapore and Switzerland in February will facilitate common approaches and accelerate tangible outputs.
Answers to economic, functional and technical design choices are solidifying and converging. A number of common views on the principles and characteristics can be observed in the recent statements and reports from the Bank of Canada, Bank of England and BIS.
‘xxxxxxxxxx’, said John Kiff of IMF in Dialogue with Movers and Shakers. eCurrency is pleased to synthesize the latest developments and share its perspectives in this issue of eCurrency Newsletter for you below. eCurrency wishes you and your family good health. It is a challenging time for the world, yet the world gets better after each challenge.
Miles Au Yeung Chief Markets Officer |
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| THE TALE OF THREE INVESTIGATIONS
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| | | Three papers evaluating the various CBDC design and implementation questions and options were published in February and March. They include: |
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| These and several other banks have issued analyses in the past about the definitions, drivers, objectives, principles and design considerations of CBDC. These three papers represent the latest maturing thinking, and explore the approaches to contract CBDC as a basis for further discussion and research, rather than proposals or decisions for a CBDC. The tables below highlight where the three papers converge, supplement and offer different implementation choices along three categories of CBDC requirements. |
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