Facebook’s recent announcement that it would launch a new stable coin called Finra has triggered a wave of fresh interest and questions about cryptocurrencies, stable coins — and, ultimately, whether Central Banks will back digital fiat currencies.
During the last meeting of the Focus Group on Digital Currency including Digital Fiat Currency, the Focus Group’s Chairman, David Wen of the Digital Fiat Currency Institute sat down with ITU during the Focus Group’s final meeting to discuss key outputs and achieved objectives.
On the subject of the collaborative work that has been undertaken, Wen remarked that the Focus Group has generated valuable information for central banks as well as ITU members to share. “With members like… the IMF, the Bank of International Settlements and all the central banks, especially experts in this area, I think [the Focus Group has brought together] the most relevant information in terms of what the future of the currency is going to be.”
“Paper money becoming digital is just a matter of time. However, how it should be digitized, what functions should be digitized, is the work of this Focus Group.”
According to a survey conducted by the Bank of International Settlements, around 70% of central banks are either currently or soon will be engaged in central bank digital currency (CBDC) work. Wen remarked on the timeliness of the Focus Group’s establishment two years ago, when few knew about digital fiat currency, or CBDC.
As Wen explains, “the money that we use today is also called legal tender. What digital fiat currency is, is in a way, digitizing that legal tender. So that’s why the central bank is very much involved – it’s digital cash in a way, that’s how most people will define digital fiat currency.”
“Everything is being digitized,” said Wen. “Paper money becoming digital is just a matter of time. However, how it should be digitized, what functions should be digitized, is the work of this focus group.”
On the key technologies behind CBDC, Wen highlights the multiple layers of underpinning technology. “The reason we studied this with ITU actually was because Dr. Chaesub Lee was saying that many changes formed because of communication technology revolution: the invention of letter, the invention of writing, the telegraph and that’s how ITU came about, and of course [the] mobile phone.”
“The technology for digital currency comes in multiple layers. Phone is clearly one of those and the communication network and… blockchain distributed ledger and hardware security. All of this play a part and we have a working group on reference architecture that basically consolidates all the technology aspects of what goes into making a digital fiat currency solution,” said Wen.
The Focus Group is comprised of three working groups:
“[The Focus Group has] created the relevant use cases by the different central banks and organizations that are actually experimenting with digital fiat currency and those outputs are really relevant, on-the-ground, deployments or pilots and I think this is just the beginning. because we are gathering requirement use cases and we are planning to establish a future of currency lab, where most of the members will participate so that all the solutions can be compared and evaluated and then provided to central banks around the world… we want to make this a clearinghouse for the technology for digital fiat currency.”