On Digital Currencies, Central Banks Should Lead

In recent years, digital currencies have shown considerable promise. Research by the People's Bank of China suggests that the best way to take advantage of these innovations is for central banks to take the lead, both in supervising private digital currencies and in developing digital legal tender of their own. At the PBOC, this effort is underway.

In approaching this challenge, the PBOC must carefully consider how to maintain financial stability, encourage innovation, and properly supervise the issuance and circulation of these new currencies. It must also set up sensible institutional frameworks and macroprudential controls. With the proper safeguards in place, China's central bank can maximize the positive effects of legal digital tender, while minimizing the negatives.