Today the Bank for International Settlements (BIS), which coordinates cooperation between central banks, published a chapter on central bank digital currencies (CBDC) as part of its annual report. This paper is different from its many previous CBDC publications in two aspects, the first being a focus on competition as a primary motivator for launching CBDCs with a fiery condemnation of cryptocurrencies and stablecoins. And the second is the role of identity and hence privacy and anonymity in the design of a CBDC.
There are numerous potential reasons for a central bank to issue a CBDC, ranging from the declining use of cash to financial inclusion and competition. The BIS honed in on competition being a key driver. Firstly, that competition comes from cryptocurrencies where the BIS was more scathing than usual.
“By now, it is clear that cryptocurrencies are speculative assets rather than money, and in many cases are used to facilitate money laundering, ransomware attacks and other financial crimes. Bitcoin in particular has few redeeming public interest attributes when also considering its wasteful energy footprint,” reads the paper.
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