Central bank-backed digital currencies (CBDCs) came into the spotlight once again as news emerged of the different plans and attitudes of largest two economies of the world -- the US and China.
On February 6, Lael Brainard, a member of the Federal Reserve said in a speech at the Stanford Graduate School of Business that the US Fed is, "conducting research and experimentation related to distributed ledger technologies and their potential use case for digital currencies, including the potential for a CBDC."
This was followed up by Federal Reserve Chairman Jerome Powell's testimony before the US Congress on February 11.
When asked about the ability of the Fed to roll out a digital dollar in the time-frame of a couple of years, Powell said, "We’re working hard on it. We fully appreciate the importance of making quick progress."
In fact, he rather candidly admitted, "...frankly Libra really lit a fire under that, and it was a bit of a wake up call that this is coming fast and could come in a way that is quite widespread and systemically important fairly quickly if you use one of these big tech networks like Libra did."
Then it emerged that the People's Bank of China has already filed 84 patents related to its plans to launch digital currency electronic payments (DC/EP) system. An earlier story on Moneycontrol referenced these internal trails in China.
On February 12, UK-based Financial Times independently verified a report which put forth the details of 84 patents that the Chinese central bank has filed with the Chinese patent office (SIPO) in relation to its digital currency plans.
The report, titled "Digital Yuan Patent Strategy," was compiled by the Digital Chamber of Commerce, an organisation which calls itself "the world’s leading trade association representing the digital asset and blockchain industry".
In this report, it was pointed out that according to patent applications, the DC/EP platform is a two-tiered system. Though inventors have been named, most of the patents are assigned to the People’s Bank of China Digital Currency Research Institute.
"The DC/EP would be distributed through two tiers: (1) between the central bank and commercial banks and (2) between commercial banks and individuals and businesses."
In the first tier, the patent applications were for protocols under the heads of issuance, circulation, management and withdrawal of the DC/EPs. The patents also dealt with investment, financing, and interbank settlements with DC/EPs.
In the second tier, the patents focused on the digital currency wallet and chip card, DC/EP usage and blockchain. The patents seem to include the usage of digital tokens. "Some patents show plans towards programmed inflation control mechanisms," added the FT report.
These developments add to the excitement around digital currencies. In late January, a Bank for International Settlements report found more than 10 percent of central banks surveyed could issue a digital currency within the next three years. And the Bahamas and Cambodia may well be the front runners in this race as indicated by recent reports.
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