Bank of France (representing the Eurosystem), Bank of Japan, Bank of Korea, Bank of Mexico, Swiss National Bank, Bank of England and the Federal Reserve Bank of New York will seek to work in partnership with a large group of private financial firms convened by the Institute of International Finance (IIF). 

Project Agorá builds on the unified ledger concept proposed by the BIS and will investigate how tokenised commercial bank deposits can be "seamlessly integrated with tokenised wholesale central bank money in a public-private programmable core financial platform."

According to BIS, this could "enhance the functioning of the monetary system and provide new solutions using smart contracts and programmability, while maintaining its two-tier structure." 

The BIS will issue a call for expressions of interest to private financial institutions to join Project Agorá. 

The paper suggests that introduction of CBDC can "improve social welfare through two channels: The first direct channel is that they can provide consumers with a better means of payment than cash. The second indirect channel comes from the reduction of card fees and the price of trading goods due to the reaction of the card network to defend their business area from CBDC. The introduction of CBDC lowers the hurdle for card usage, which has a positive effect on financial inclusion but can widen inequality due to the regressive-transfer structure of the benefits."

The Governor discussed four lessons the bank learned from its 10-month experiment on a retail CBDC based on distributed ledger technology:

• First, introducing a CBDC involves not just developing technology but also a process of balancing trade-offs between various goals. 
• Second, developing a successful CBDC is much more complex than anticipated.
• Third, it may never be too early to establish effective private-public partnerships for CBDCs.
• Lastly, further exploration of wholesale CBDCs is essential.

The bank will also organise a task force dedicated to CBDC research and recruit additional experts. It will also engage in discussions with the Bank for International Settlements and other international organisations, keeping an eye on CBDC development at other central banks.

The Bank of Korea has issued a study that investigates the effects of the introduction of a CBDC on financial stability.

The study uses a monetary general equilibrium model in which banks provide liquidity in the form of fiat currency, and commercial bank deposits compete with the central bank deposits in CBDC account.

It found that if people had access to a CBDC, which would be via direct deposit at the central bank, this would eventually decrease the supply of private credit by commercial banks.

"The introduction of deposits in CBDC account essentially decreases supply of private credit by commercial banks, which raises the nominal interest rate and hence lowers a commercial bank's reserve-deposit ratio," the study said.

It added:

"This has negative effects on financial stability by increasing the likelihood of bank panic in which commercial banks are short of cash reserves to pay out to depositors."

However, once the central bank can lend all the deposits in CBDC account to commercial banks, an increase in the quantity of CBDC that does not require reserve holdings can enhance financial stability by essentially increasing supply of private credit and hence lowering nominal interest rate.

"Once the central bank is allowed to lend all the deposits in CBDC account to commercial banks, the introduction of CBDC can improve financial stability by reducing the likelihood of bank panic," the study added.

The study explains that an increase in the quantity of CBDC implies a greater increase in the supply of private credit compared to the traditional case where all the deposits are made in commercial banks.

Unlike commercial bank deposits, the deposits in CBDC account do not require reserve holdings, which allows more resources available for supply of private loans.

Therefore, reserve-deposit ratio falls and nominal interest rate falls as well in equilibrium.

The probability of bank panic also decreases owing to the direct effect of an increase in CBDC despite a decrease in reserve-deposit ratio which has the effect of increasing the probability of bank panic.

In November last year, International Monetary Fund Managing Director Christine Lagarde called for central banks to consider the possibility of issuing CBDCs, arguing that "money itself is changing" and that the demand for cash is decreasing.