Legal Frameworks and User Privacy Pivotal for CBDC Adoption, Says BIS Chief
Summary:
Agustín Carstens, the head of the Bank of International Settlements, stresses the importance of legal frameworks that ensure user privacy and the freedom to choose central bank digital currencies (CBDCs). He believes such frameworks are crucial for the successful acceptance and development of CBDCs. He also acknowledged that most central banks worldwide need to update their legal structures to aid CBDCs deployment. Carstens further addressed the potential misuse of CBDCs and emphasized that they should operate within a framework of well-defined rights and obligations.
The chief of the Bank of International Settlements, Agustín Carstens, holds the view that user privacy and the choice to switch between central bank digital currencies (CBDCs) and other financial forms are pivotal to the successful acceptance of CBDCs. This was his message at the BIS Innovation Hub gathering in Switzerland on September 27. He believes that legal regulations still play a significant role in the growth and spread of CBDCs globally.
"The basis for the legitimacy of a CBDC is the legal prerogative of a central bank to issue it. This right must have solid backing in law", he stated. Carstens further explained that the existing laws in different nations outline the types of money that their central bank can issue, usually being physical banknotes and the credit balances in current and reserve accounts.
"An IMF paper published in 2021 reveals that approximately 80% of central banks are either barred from issuing a digital currency by existing laws or the legal situation is ambiguous," he added. Carstens gave reference to a BIS research which shows that 93% of global central banks are in the middle of differing stages of CBDC development.
He noted that many of these organizations are eager to cater to the public's appetite for digital fiat. He highlighted that outdated or undefined legal structures are a blockade to their rollout and termed them unacceptable.
Addressing the possible misuse of CBDCs regarding social credit ratings by issuers, Carstens stressed that a CBDC should operate within a framework composed of well-defined rights and obligations. There are three primary components to consider, he stated, consisting of ensuring CBDC user privacy, maintaining the financial system's integrity, and securing people's right to opt for a CBDC, or any other financial form.
Carstens acknowledged the variances among nations in terms of cash usage and the adoption of digital payments and remarked that retail CBDCs could be projected to coexist with physical cash as well as commercial bank money. He said, "The introduction of a CBDC by a central bank should expand choices for the society, not limit them."
China is steadily progressing in the development and application of its Digital Yuan CBDC program. On another note, the CBDC "Anti-Surveillance State Act" bill, aiming to stop the U.S. Federal Reserve from bringing out a CBDC, was passed by the House Financial Services Committee on September 21. The bill is poised to move to congress next, as it aims to resist any form of "state control over currency".
Published At
9/27/2023 1:39:27 PM
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