The central banks for Canada, Japan, Sweden, Switzerland, the EU, and the UK have created a working group to explore central bank digital currency (CBDC) applications, entering a race with China, which recently ramped up it own efforts after five years of research.

Why it matters: The global rivalry in digital currencies is heating up as central banks from an increasingly wider swath of countries explore potential use cases for tokenized money.

The recent acceleration may threaten China’s aspirations to be the first country to roll out digital fiat currency, or digital currency electronic payment (DCEP). The tokenized currency would allow the People’s Bank of China (PBOC), the country’s central bank, to more easily monitor money flows. It could also increase the yuan’s competitiveness to the dollar, currently the dominant global currency, by providing more liquidity.

China’s central bank has accelerated the development of its own digital currency amid concerns that other institutions or companies like Facebook’s Switzerland-based Libra might beat it to the punch.

Details: The central banks have formed a working group with the Bank for International Settlements (BIS) to explore potential cases for CBDCs in their home countries, according to an announcement released by members of the group on Tuesday.

The group will assess and share findings with regard to the “economic, functional and technical design choices, including cross-border interoperability” of CBDCs.

The banks will also work closely with international financial bodies, particularly the Committee on Payments and Market Infrastructures (CPMI) and the Financial Stability Board (FSB).

Context: The Chinese central bank has not released a timetable for its digital currency, however, the state-run Global Times reported that it could be “imminent.”