By Tom Wilson
LONDON (Reuters) – The public and private sectors must collaborate to ensure new forms of wholesale and retail cross-border payments work together smoothly, Bank of England (BoE) Deputy Governor Jon Cunliffe said on Tuesday.
The world’s largest central banks, including the BoE, are looking at developing digital currencies that could play a role in making international payments faster and cheaper for both large-scale and consumer transactions.
As cryptocurrencies such as bitcoin increasingly go mainstream and private efforts like the Facebook-backed Diem seek approval, the onus is on central banks to accelerate plans to issue digital cash to fend off threats to control over money.
With new forms of payments emerging, the public sector and private firms should work together so payments can switch between different systems, Cunliffe said at an online Bank for International Settlements event.
“Getting a payment from A to B may involve switching between payment rails at some point, out of the wholesale system into the retail system, or between rails that don’t currently exist,” he said.
“We have to ensure that form of interoperability is present. And the last thing is very obvious – this has to be done by the public and the private sector, together.”
Central bank digital currencies (CBDCs) are the electronic equivalent of cash. Backed by a central bank, they would be as risk free as traditional money.
CBDCs for major central banks are still some way off becoming reality, even as the People’s Bank of China forges ahead with trials of its digital yuan.
The U.S. Federal Reserve would not proceed with a CBDC without congressional approval, its chair Jerome Powell said on Monday, with current research focused on the risks and benefits and not designed to create a prototype.
(Reporting by Tom Wilson. Editing by Thyagaraju Adinarayan and Mark Potter)
