Even though the Bitcoin price slide was halted for the time being on Tuesday, the Bank for International Settlements (BIS) chose the day well for the pre-release of a chapter from its annual report.

Because in it the institution, which is considered the “bank of central banks”, deals with its vision of a monetary system in the digital age.

And – unsurprisingly – the central banks and their digital central bank money, which is still being developed, play an anchor function.

The statements of the Basel-based BIS, which manages the foreign exchange reserves for the most important central banks and also serves as an economic and monetary policy think tank, are very fundamental and tie in with earlier publications on digital central bank money.

Markus Fruehauf

Editor in Business.

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But the recent price dislocations in the crypto-asset market confirm earlier skepticism by BIS researchers.

The course of the Bitcoin price reflects how quickly confidence in this new asset class, which is independent of the central banks, can be exhausted: Last November it was still at 67,000 dollars and at the weekend under 18,000 dollars.

On Tuesday and Wednesday the rate stabilized above $20,000, but the rate has lost 70 percent.

"Anything crypto can do, CBDC can do better," Hyun Song Shin, economic adviser and head of economic research at the BIS, said on a conference call to launch the chapter from the annual report, which will be released next Sunday.

The BIS economists see the recent price turbulence as proof that crypto assets are not comparable to state money.

They may not meet requirements such as security, accountability, efficiency, inclusion or openness for a future digital financial system.

The researchers at the BIS are convinced that a financial system based on trust in central banks and a digital version of state money can accelerate innovation while ensuring stability and security.

They continue to rely on the private sector, which can make a similarly important contribution to the development and expansion of fast payment systems (real-time) as the central banks do with their digital money.

BIS chief researcher Shin sees CBDC and highly efficient payment systems as close relatives from a consumer perspective.

However, he believes it is necessary to start developing digital central bank money now.

It is still unclear whether a digital dollar is coming

The European Central Bank (ECB) is already so far that it wants to present a first prototype of the digital euro in the coming year.

The timeframe for the introduction is still vague.

ECB President Christine Lagarde had promised a period of five years in 2021.

The American Federal Reserve is pursuing the topic much more cautiously.

The US Federal Reserve has not yet decided whether to introduce a digital dollar.

However, all leading central banks are working on this topic under the umbrella of the BIS.

The central bank of China has made the most progress, where the digital yuan is already being tested in individual regions.

The question of how digital central bank money can be made available to households without bypassing the commercial banks is still unresolved.

In a financial crisis, these can also get into trouble if customers withdraw their deposits from their accounts and switch them to secure digital central bank money.

The ECB is considering capping the amounts that private individuals are allowed to hold in the digital euro.

The BIS, in turn, relies on trust in central banks, their advances in developing digital central bank money and the fast payment systems for consumers.

Together, these could be the basis for a future monetary system that could drive innovation in the private sector.

Shin tries to compare it to a tree whose robust trunk represents the central bank.

This tree hosts a rich and vibrant ecosystem of private providers whose services are geared towards meeting users' needs.

The BIS researchers see the task of the private sector in developing customer-oriented offers such as the tokenization of monetary and financial instruments or efficient payment options.