The Need for Evolution in the Global Monetary System
The head of the Bank for International Settlements (BIS), Agustín Carstens, emphasizes the importance of evolving the global monetary system to meet the demands of users. While cash and commercial bank money currently serve society well, Carstens believes that advancements in digital services and changing user expectations necessitate a shift.
Central Banking Digital Currencies (CBDCs) and User Protection
Carstens highlights central banking digital currencies (CBDCs) as a potential improvement to the current system. He argues that central banks have a responsibility to establish a strong legal framework for CBDCs, ensuring legitimacy, privacy, integrity, and choice for users. Protecting people’s privacy and preferences is crucial in this process.
The Importance of International Cooperation
Carstens emphasizes the need for international cooperation in creating a connected and interoperable digital system. He emphasizes that preserving core elements such as user privacy, financial system integrity, and user choice between CBDCs and other forms of money is essential. Fragmentation and lack of interoperability among different digital currencies should be avoided.
Cryptocurrencies and Stablecoins Are Not Money
Carstens expresses his skepticism towards cryptocurrencies, including stablecoins, stating that they are “not money” due to their lack of centralized backing from a banking institution. He argues that these instruments do not offer the same level of protection, regulatory framework, access to central banks as lenders of last resort, or guaranteed payment finality as traditional forms of money.
Hot Take: The Future of Digital Cash
As digital services advance and user expectations evolve, central banking digital currencies (CBDCs) are becoming increasingly important. The global monetary system must adapt to meet the demands of users who want digital, programmable money that can be transferred quickly, cheaply, and securely across borders. Central banks have a responsibility to create a strong legal framework for CBDCs that protects user privacy, maintains the integrity of the financial system, and allows users to choose between different forms of money. International cooperation is crucial to avoid fragmentation and ensure interoperability among digital currencies. While cryptocurrencies and stablecoins may have gained popularity as speculative investments, they do not meet the standards expected of money due to their lack of centralized backing and regulatory framework.
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