According to Chair Jerome Powell, the Fed is sharing its findings on central bank digital currency (CBDC) with six other central banks at the BIS.
Regulators in the United States and the United Kingdom have urged for more international cooperation to assist them regulate decentralised finance (DeFi) and the burgeoning crypto sector.
“I believe that if we’re going to unlock the potential of digital assets and services, a lot of the progress we make along this road will depend on really high levels of international collaboration,” US Federal Reserve Chair Jerome Powell said at the Bank for International Settlements (BIS) Innovation Summit on Wednesday.
The Bank of England’s governor, Andrew Bailey, agreed that regulators must “soon” gain a handle on DeFi and the sector’s growth.
“We have to do it as a team, on a global scale.” Because if we try to accomplish it in our own places, we’ll fail because it’ll get away from us and… it’ll always be somewhere else,” Bailey remarked at the summit.
According to a Chainalysis research, the United Kingdom gained $170 billion in value via DeFi protocols between June 2020 and July 2021, the biggest in Europe at the time.
Digital currencies issued by central banks
According to Powell, the Fed is sharing its research on central bank digital currency (CBDC) with six other central banks at the BIS. Their conversations will include stablecoins, crypto assets, and financial innovation, among other topics.
“We are committed to working with our domestic and international colleagues to ensure that payment and monetary systems change responsibly, bringing about improvements while preserving safety, soundness, and financial stability,” Powell said.
In January, the Federal Reserve issued a long-awaited white paper on central bank digital currencies, but it made no commitment to create a digital dollar. According to the white paper, any CBDC must safeguard anonymity, act as an intermediary with the private sector, be transferrable, and follow money laundering and terrorism funding rules.
Meanwhile, in October, private parties in the United Kingdom established the Digital Pound Foundation, a non-profit organisation dedicated to promoting the creation of a CBDC in the country.
All across the world
The Fed is working closely with other central banks and international partners to advance the G20 countries’ cross-border plan. Powell also stated that the roadmap had the ability to address the G20’s international payment frictions.
On Tuesday, the BIS Innovation Hub, in collaboration with central banks in Australia, South Africa, Singapore, and Malaysia, completed their ongoing experiment with Project Dunbar, a multi-CBDC platform. The researchers discovered that their “technically viable” prototype platform for settling state-backed virtual assets.
Meanwhile, European Central Bank President Christine Lagarde stated that the bank’s digital euro work must be completed as soon as possible. The European Central Bank (ECB) is on schedule to complete its digital euro initiative in two years.
In October, the International Monetary Fund said that 110 countries are “in some stage” of looking into the possibility of establishing a CBDC in their country.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.