Global central banks are pressing ahead with testing digital currencies, with China leading the way

• Global central banks are increasingly looking at creating digital currencies, with China in the lead.
• The Bank of Japan's digital currency committee held its first meeting, while China proposed global rules.
• Some analysts have said central bank-backed digital currencies threaten bitcoin, but others say the two aren't linked.

Global central banks are pressing ahead with their investigations into launching their own digital currencies, with China at the head of the pack.

China's central bank proposed global rules for central bank digital currencies - also known as CBDCs - on Thursday at the Bank for Institutional Settlements conference.

The Bank of Japan on Friday held the first meeting of a coordinating committee on CBDCs, saying it will begin testing "technical feasibility of the core functions and features required" of such currencies in April.

Japan's central bank said it still has no plan to issue a CBDC any time soon, but thinks it needs to be experimenting to stay ahead of developments in payments.

Global central banks are working hard on how they might issue digital currencies, largely in response to plans by private companies such as Facebook to develop their own currencies and to the increasing use of digital payments.

A CBDC would let people access central bank money digitally to hold and make payments. The public can currently only hold central-bank issued money in the form of physical coins and notes, and largely uses electronic cash held at banks or on prepaid cards.

A group of central banks, including the Federal Reserve, the Bank of England, the European Central Bank and the BoJ, is currently looking at how CBDCs would work.

But the group lags behind China, which is forging ahead with the digital renminbi and has rolled out tests of the currency.

At the BIS conference on Thursday, People's Bank of China official Mu Changchun proposed countries work together on the issue.

He said that "interoperability should be enabled between CBDC systems," according to Reuters. And he added that a foreign exchange platform should be supported by so-called distributed ledger technology like blockchain, which cryptocurrencies like bitcoin also use.

Some analysts have said CBDCs could threaten bitcoin. But the European Central Bank has said they have little to do with cryptocurrencies, which it sees as speculative assets, not actual currencies.

Miha Grčar, head of business development at crypto exchange platform Kraken, told Insider CBDCs would not erode the appeal of cryptocurrencies.

"It was a mistrust in the central bank system that gave birth to bitcoin in the first place" he said. "If central banks adopt blockchain, but don't address issues of opaqueness, currency debasement, and growing public skepticism, they are not solving anything, but simply exercising and centralizing control."