The chief economist and head of global research for Dutch bank ING has expressed his belief that central bank digital currencies (CBDC) are advancing quickly from the horizon.

Mark Cliffe, who leads a worldwide team of economists and strategists for the company, voiced his thoughts on the matter in a video, where he said “central banks are probably going to have to make some move on a digital currency within the next two to three years.” 

The driver of this urgency, he asserted, would be Facebook which has “ put pressure on” with its seemingly short timeframe for the launch of Libra, which may arrive “in the coming year”. Though many observers have considered such predictions to be optimistic in the face of the worldwide scrutiny policymakers will put the social media company’s plans under, it is perhaps the recent announcements from Mark Zuckerberg that he is “really focused” on getting Libra out into the wild, that have led Cliffe to say that his team have “already got some sense of urgency amongst the policy community.” 

China has long appeared to be leading the way on the issuance of a digital cash, to serve as a replacement for the M0 money supply – essentially cash and coins – that generally falls under the purview of Central Banks.

However, recent press conference comments by the People’s Bank of China head Yi Gang appeared to pour cold water on rumors of an impending manifestation of its research, which began as far back as 2014. Indeed, in telling gathered reporters that there was no formal roadmap for the path development would take, he called into question whether any solution the Chinese would push forward would be blockchain powered at all.  

Cliffe believes that, rather than the work of China, one the other main motivating factors for other countries work in the area would be the allure of more control over, and possibly even the replacement of, M0. Having a digital currency, he says, means “you might be able to get rid of the real currency, the hard cash and notes, to make it into a fully digital exercise, which would then potentially allow the central banks to move even further into negative territory with interest rates.” 

He believes that such structural changes to an economy would “open up a whole range of new policy options,” for nation states around the world. 

In a recent Unchained Podcast that covered the motivations for the issuance of CBDCs, Yan Liu – the Assistant General Counsel at the legal department of the International Monetary Fund (IMF) – essentially the Bank of Central Banks, told presenter Laura Shin that “many of our member countries are very interested in this issue,” which meant that the IMF was obligated to “understand the implications so that we can provide policy advice and technical assistance to our member countries in this area.” 

Lui went on to name “Australia, Brazil, China, Denmark, Philippines,” as countries with Central Banks actively researching a digital cash alternative, while her fellow IMF employee Dong He – Deputy Director of the Monetary and Capital Markets Department – told Shin that if private digital currencies like Libra were to come to prominence, and “there’s less demand for central bank digital currency, for central bank currency, [or] if cash is no longer used for economic transactions then either the public will have no interface or no interactions with the central bank.” 

This would ultimately mean that “The central bank will have more difficulty in influencing monetary conditions in the economy” due to losing its control over the main unit of account for pricing within its borders. This, He added, means that the IMF believes “it’s important for the central bank to be engaged, to stay in the game in the digital age and that would help the central bank achieve their mandate of maintaining price stability within the digital age.” 

Mark Cliffe concludes his thoughts by saying that a major problem for any CBDC will be consumer acceptance, especially if such a move put a further squeeze on savers with even lower interest rates. 

“There are a lot of people were pretty angry about the interest rates being so low already in certain parts of Europe,” he says, but that ultimately such a move “might open up a range of other options for the central banks to help support economic activity in the next downturn.” 

We reached out Mr. Cliffe for further comment on the matter, but have yet to receive a reply. We will add his thoughts on our questions if possible. 

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