Legal frameworks that ensure user privacy and freedom of choice between central bank digital currencies and other forms of money will be key in driving CDBC adoption, according to the head of the Bank for International Settlements.
Speaking at the BIS Innovation Hub conference in Switzerland on September 27, BIS Director General Agustín Carstens emphasized that legal frameworks remain a key consideration in the development and spread of central bank digital currencies around the world:
“More importantly, the legitimacy of a CBDC will derive from the legal authority of the central bank to issue it. This authority must be anchored in law.”
He added that different countries’ laws determine the types of money their central banks can issue, which usually includes physical cash in addition to credit balances in current and reserve accounts:
“According to an IMF paper published in 2021, nearly 80% of central banks are either not allowed to issue digital currency under their current laws, or the legal framework is unclear.”
Carstens also pointed to a Bank for International Settlements study indicating that 93% of the world’s central banks are involved in the development of CBDCs at various different stages. Given that most of these institutions are actively looking to meet public demand for digital forms of fiat currencies, the BIS president said that outdated or unclear legal frameworks hindering their deployment are unacceptable.
Criticisms of the misuse of central bank digital currencies (CBDCs) in relation to social credit scores or rankings by their issuers have also been addressed. According to Carstens, a central bank digital currency (CBDC) needs to operate within a framework of defined rights and obligations.
Related: US Democrats talk about global leadership of central bank digital currencies, Republicans fear ‘dark side’
The Director General of the Bank for International Settlements says three basic elements are necessary. This includes maintaining the privacy of CBDC users and their data, the integrity of the financial system, as well as people’s right to choose between CBDCs and other forms of money.
Carstens noted that different countries have different trends regarding the use of cash and adoption of digital payments and that retail CBDCs are expected to coexist alongside cash and commercial bank money:
“A central bank offering CBDCs should increase the choices available to society, not reduce them.
As Cointelegraph previously reported, China continues to push the development and use of its central bank digital currency (CBDC) digital yuan program. A recent update to the e-CNY pilot app now allows tourists heading to China to pre-load their digital yuan wallets using Visa and Mastercard payments.
Meanwhile, the Central Bank Digital Currency (CBDC) Anti-State Surveillance Act bill, which aims to prevent the US Federal Reserve from issuing a central bank digital currency (CBDC), passed a vote in the House Financial Services Committee on September 21. . The bill will next head to Congress, where it looks to fight “state control of the currency.”
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