Bank for International Settlements
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The BIS study suggests that cryptocurrency markets rely on regulated financial institutions to operate, bringing cryptocurrencies within reach of national regulation.
Cryptocurrencies' decentralised model of generating trust limits their potential to replace conventional money, Chapter V of the Annual Economic Report 2018 argues.
New cryptocurrencies are emerging almost daily, and many interested parties are wondering whether central banks should issue their own versions. But what might central bank cryptocurrencies (CBCCs) look like and would they be useful? This feature provides a taxonomy of money that identifies two types of CBCC a retail and wholesale a and differentiates them from other forms of central bank money such as cash and reserves. It discusses the different characteristics of CBCCs and compares them with existing payment options.
The report provides an analytical framework for central banks and other authorities to review and analyse the use of distributed ledgers in payment, clearing and settlement activities. The main aim of the framework is to help understand the uses of DLT and, in doing so, identify both the opportunities and challenges associated with this technology in a critical part of the financial system.
This report considers the possible implications of interest to central banks arising from these innovations. First, many of the risks that are relevant for e-money and other electronic payment instruments are also relevant for digital currencies as assets being used as a means of payment. Second, the development of distributed ledger technology is an innovation with potentially broad applications. Wider use of distributed ledgers by new entrants or incumbents could have implications extending beyond payments, including their possible adoption by some financial market infrastructures (FMIs), and more broadly by other networks in the financial system and the economy as a whole. Because of these considerations, it is recommended that central banks continue monitoring and analysing the implications of these developments, both in digital currencies and distributed ledger technology.
