BIS paper flags ‘notable gaps’ in CBDC research

Policy work on cross-border CBDCs is “marching beyond the research frontier”, say economists
Globe

Despite rapid progress on research into central bank digital currencies (CBDCs), more work is needed in some important areas, a Bank for International Settlements working paper says.

Raphael Auer and co-authors identify cross-border CBDCs as an area where policy development is “marching beyond the research frontier”.

The paper explores the literature on CBDCs to date. It notes that central banks are moving towards solving some of the systemic issues identified in early research, for example by imposing limits on CBDC holdings to mitigate the risk of bank runs.

But CBDCs raise even more issues at the global level, where research is still in its “infancy”, the authors say. Although CBDCs offer a “blank slate” for central banks to address the cost and speed issues of current international payments, the authors warn that rushing to launch CBDCs could lead to further fragmentation.

Unanswered research questions include how to align regulation, supervision and technology of payment systems, and whether to structure CBDCs to allow a more diverse set of firms to access central bank money. Early adopters of CBDC will need to be able to interface with the older systems of countries that are moving more slowly, the authors note.

“Answering these open questions will be crucial for a correct design of CBDCs as a new form of money in the digital era,” the authors say.

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