China central banks putting their own spin on digital coins

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Earlier this month, Benoit Coeure, a well-known central bank policymaker, sounded an alarm for central banks to act now on minting their own central bank digital currencies (CBDCs).

In a speech, the former European Central Bank economist who leads innovation at the Bank of International Settlements (BIS) warned that rapidly mushrooming cryptocurrencies will challenge the business models of international banking — if monetary authorities don’t quickly act.

As China moved on Friday to effectively outlaw cryptocurrency — which roiled digital coin spot prices worldwide — central banks around the world are redoubling their efforts to exert influence of their own within the sector. It underscores what most observers believe is shaping up to be an arms race in a new era of global finance.

The Bank of International Settlements/BIS’s innovation hub recently announced plans to build a crypto platform so the international community of central bankers can transact in CBDCs and other crypto assets.

Calling the feat Project Dunbar, the effort begins with designing a supposedly decentralized platform so the dozens of countries whipping up their own style of CBDC can make use of the new technology the same way retail investors trade cryptocurrency and NFTs.

“The technology behind digital currency is quite elegant in that it cuts out a lot of the operational complexity associated with exchange, clearing and settlement of payments on the backend,” Andrew McCormack, Centre Head of the BIS Innovation Hub Singapore, told Yahoo Finance.

In partnership with central banks in Australia, Malaysia, Singapore and South Africa, Project Dunbar wants to build a platform for CBDCs to improve cross border transactions for the international banking community.

Twitter’s integration of cryptocurrencies for tipping this week is a similar display of this use case for crypto. It’s also a solution to the same problem that the government of El Salvador is trying to solve by making bitcoin legal tender.

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