TOKYO: A group of the world’s seven major central banks has scope to set common rules and platforms for their own digital currencies that could lay the groundwork for more efficient cross-border payments, a Bank of Japan (BoJ) official said on Thursday.

The role central bank digital currencies (CBDC) play differs for advanced nations with a robust banking system and emerging economies that can use CBDCs to make up for shortfalls in their financial infrastructure, said Kazushige Kamiyama, head of the BoJ’s department overseeing development of a CBDC.

“It’s therefore better to come up with common rules among countries with similar economic structures,” he said. “As such, it’s desirable for the BoJ to discuss common rules with the six other major central banks,” he told Reuters in an interview.

The BoJ is among a group of seven major central banks jointly looking into core features of CBDCs, which includes the US Federal Reserve and the European Central Bank.

“For advanced economies, the best approach would be to heighten the function of payment and settlement systems in several stages, and design them in a way so new technology can be incorporated flexibly,” Kamiyama said.

Global central banks have stepped up efforts to develop their own digital currencies to modernise financial systems and speed up domestic and international payments.

The BoJ this month launched the first phase of experiments for issuing a CBDC, joining efforts by other central banks aiming to match the innovation achieved by the private sector.

“The near-term priority is to make each country’s domestic payment and settlement system convenient. Down the road, there’s room to consider cross-border usage of CBDCs,” Kamiyama said.

While there was scope to set common rules for a broader range of nations beyond advanced economies, debate on how to use CBDCs for cross-border transactions was still in the early stages in many countries, Kamiyama said.

The key challenge would be to create a CBDC that was attractive but not too much so as to trigger an outflow of funds from cash notes and bank deposits, Kamiyama said.

Setting a limit on how much CBDCs each entity could hold could be a solution, though setting such curbs would make CBDCs less convenient, he said.

“In finding solutions to such trade-offs, we’d like to come up with ideas,” he said. “One idea could be to clarify the different roles private entities and CBDCs play.”