The Urgent Need for Interoperable Rules for CBDCs, Says BIS Chief
The Chief of the Bank for International Settlements (BIS), Augustin Carstens, has stressed the importance of nations collaborating to establish a set of interoperable regulations for central bank digital currencies (CBDCs). As the world moves towards digitalization, CBDCs can meet the public’s demand for digital and programmable money, enabling faster and cheaper cross-border transfers and driving innovation in the financial system.
Pushing for a Regulatory Framework
In a recent speech, Carstens emphasized the role of central banks in providing money to society through cash and central bank reserves. However, he highlighted the need for the monetary system to evolve to meet changing demands. With the decline in cash usage and the rise of digital services, people are seeking new forms of money that are digital and easily transferable across borders.
Central banks worldwide are exploring CBDCs as a solution. By July 2022, over half of central banks were running experiments or pilots, according to IMF data.
Interoperability and Privacy as Top Priorities
Implementing CBDCs requires not just technological advancements but also an advanced legal framework. Carstens emphasized that money is a social construct based on trust, which relies on a strong legal foundation. The legal framework for CBDCs should ensure legitimacy, privacy, integrity, choice, and clearly defined rights and obligations.
Privacy concerns have been raised by citizens in relation to government-issued digital currencies. Addressing these complex issues is crucial for the widespread adoption of CBDCs.
Hot Take: Collaboration is Key in Shaping the Future of CBDCs
The urgent need for collaboration between nations in establishing interoperable rules for CBDCs is clear. As the world embraces digitalization, CBDCs can provide the public with digital, programmable money that facilitates faster and cheaper cross-border transfers. However, implementing CBDCs requires not just technological advancements but also a robust legal framework that ensures legitimacy, privacy, and choice. It is essential to address these complex issues in a productive manner to enable the widespread adoption of CBDCs and drive innovation in the financial system.
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