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Legal structures that guarantee user privacy and the ability to choose between central bank digital currencies and alternative monetary forms will be crucial in promoting CBDC adoption, as stated by the head of the Bank of International Settlements.
During his address at the BIS Innovation Hub conference in Switzerland on Sept. 27, BIS general manager Agustín Carstens emphasized that legal frameworks are a vital factor in the creation and expansion of CBDCs globally:
“Most fundamentally, the legitimacy of a CBDC will be derived from the legal authority of the central bank to issue it. That authority needs to be firmly grounded in the law.”
He noted that the laws of various countries define the types of money that their central banks are permitted to issue, which generally encompasses physical cash as well as credit balances in current and reserve accounts:
“According to an IMF paper published in 2021, close to 80% of central banks are either not allowed to issue a digital currency under their existing laws, or the legal framework is unclear.”
Carstens also mentioned a BIS study indicating that 93% of the world’s central banks are involved in the development of CBDCs at various stages. Given that most of these institutions are actively seeking to address public demand for digital forms of fiat, the BIS chief remarked that outdated or ambiguous legal frameworks obstructing their implementation are unacceptable.
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Concerns regarding the potential misuse of CBDCs in relation to social credit scores or standings by their issuers were also discussed. Carstens asserted that a CBDC must operate within a framework of clearly defined rights and obligations.
Related: US Democrats advocate for CBDC global leadership, Republicans express concerns over ‘dark side’
The BIS general manager stated that three essential elements are necessary. These include safeguarding the privacy of CBDC users and their data, maintaining the integrity of the financial system, and ensuring the right of individuals to choose between a CBDC and other monetary forms.
Carstens observed that different nations exhibit varying trends concerning cash usage and the adoption of digital payments, suggesting that a retail CBDC may be expected to coexist with cash and commercial bank money:
“A central bank that introduces a CBDC should increase the choices for society, not diminish them.”
As previously reported by Cointelegraph, China continues to advance the development and utilization of its Digital Yuan CBDC initiative. The most recent update to its pilot e-CNY app now permits tourists visiting China to pre-load their digital yuan wallets using Visa and Mastercard payments.
In the meantime, the CBDC “Anti-Surveillance State Act” bill, which aims to prevent the U.S. Federal Reserve from issuing a CBDC, passed a vote in the House Financial Services Committee on Sept. 21. The bill will proceed to Congress next as it seeks to combat “state control over currency.”
