You are here: Home » Reuters » News
Business Standard

Central banks told to think twice before boarding Bitcoin bandwagon

Reuters  |  LONDON 

By Jones

LONDON (Reuters) - Central banks should think hard about potential risks and spillovers before issuing their own cryptocurrency, the for International Settlements (BIS) said in a report on Monday.

The report by two committees at the BIS, a forum whose members include the and European Central Bank, is wary of central banks issuing their own central digital currency, or CBDC.

"There are risks we do not fully understand at this point," said Jacqueline Loh, chair of the markets committee.

"Any step towards a possible launch of a CBDC should be subject to careful and thorough consideration," added Loh, who is also of the

The report looks at the possible impact of a "wholesale" digital currency only for a limited audience like banks, and a "retail" version for all.

Benoit Coeure, who chairs the committee on payments and market infrastructure, said there was more caution with the "uncharted waters" of a retail CBDC.

It could impact deposits, a major source of funding for commercial banks, with implications for financial stability in times of market stress, the report said.

There was no evidence that digital currencies would allow central banks to implement they already have.

No has issued a digital currency, though the in Sweden, where the use of cash has fallen, is studying a for small payments. It said last month its study won't be finalised until late 2019, later than initially indicated.

The report said blockchain or the distributed (DLT) that underpins cryptocurrencies, could make settling trades of securities and forex more efficient.

"DLT is where the action is," said Coeure, who is also an ECB

of England said that while a CBDC needed careful consideration, a more immediate priority is how to use the new technologies to meet the current demand for fully reliable,


The report comes at a time when privately issued cryptocurrencies like Bitcoin have seen huge price swings to trigger stark investor warnings from regulators.

This has not crimped the sector's enthusiasm, however.

CaskCoin launched on Monday the "first" cryptocurrency that gives investors a chance to own a share in a 40 million pound portfolio of "world class" whisky stored in a Scottish warehouse.

The report is timed to inform discussion among central bankers and from the Group of 20 Economies (G20). They meet in early next week to discuss if new regulation is needed for private cryptocurrencies.

The Financial Stability Board, the G20's regulatory watchdog headed by Carney, will report on the private cryptocurrencies.

"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.

Investor protection along with anti-money laundering and terrorist financing safeguards are the priority, while consideration of cryptocurrencies' underlying and futures markets would come later, Coeure said.

"So any discussion in the 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.

(Additional reporting by in Stockholm; Editing by Matthew Mpoke Bigg)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, March 13 2018. 01:35 IST