Central banks must 'roll up their sleeves' and urgently speed up their work on their own digital currencies before crypto upends the current financial system, the BIS says

SOPA images and bitcoin.
Benoit Coeure (head of the BIS Innovation hub) urged central banks not to slow down their efforts on digital cash.

He spoke in Ljubljana stating that digital currencies are necessary to ensure financial stability and price stability.

He stated that they should accelerate because "stablecoins are already here" and crypto assets.

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The Bank for International Settlements urges central banks to intensify their efforts in creating their own digital currencies while they are still in place. This is because stablecoins as well as cryptocurrencies are already a reality.

Benoit Coeure is the head of BIS Innovation Hub. He stated that central bank digital currencies should be simple to use, cost-effective, convertible, instant settlements, constantly available, and provide a high level of safety, security, resilience, and flexibility.

They are competing with cryptocurrencies such as bitcoin and ether as well as other stablecoins. These currencies are tied to the dollar or gold and central banks will need to spend years developing digital cash that is suitable for their purposes, he stated.

"It is now that central banks need to move. It is time to get busy with the details of CBDC design. While CBDCs may take many years to roll out, stablecoins or crypto-assets can be done in a matter of months. It is therefore even more urgent to begin," Coeure stated in a speech delivered at the Eurofi Financial Forum, Ljubljana.

Recent popularity of cryptocurrencies such as bitcoin and stablecoins like tether has raised concerns among central banks about the potential risk they pose to the stability the financial system. Many are now actively researching and developing their own CBDCs.

"Banks are concerned about the impact of CBDCs on customer deposits. These concerns are being considered by central banks, who are working to find solutions. Coeure stated that banks are part of the future CBDC system. He said, "But don't make any mistake: global stablecoins and DeFi platforms will continue to challenge the banks' models."

China has already begun to test a digital version for the yuan. The Bahamas have also issued the "sanddollar" and Nigeria announced this week that it will pilot its "enaira" next month. The exploratory phase of major central banks like the Federal Reserve, Bank of England, and European Central Bank is still quite extensive.

The BIS innovation center, which focuses "critical trends in tech affecting central banks", announced that the central banks of Australia Malaysia, Singapore, South Africa and South Africa are currently working on Project Dunbar, which will test cross-border payments in CBDCs.

"A CBDC's ultimate goal is to preserve the best parts of our current systems while still providing a safe environment for innovation tomorrow." Central banks must act while the existing system is in place, and to do this, Cur, who was previously on the executive board for the European Central Bank, stated.