Agustin Carstens, the General Manager of the Bank for International Settlements (BIS), has called upon countries to develop clear legal frameworks to support the deployment of Central Bank Digital Currencies (CBDCs).
Agustin expressed concerns about outdated or unclear legal structures potentially hindering the rollout of CBDCs, emphasizing the public’s demand for modern and reliable forms of money.
Central Bank Digital Currency (CBDC) is a digital form of central bank money that is issued and regulated by central banks. CBDCs are similar to cryptocurrencies, but they are state-issued and operated.
They are designed to provide businesses and consumers with privacy, transferability, convenience, accessibility, and financial security.
They could also decrease the cost of maintenance that a complex financial system requires, reduce cross-border transaction costs, and make money transfers cheaper.
The Bank for International Settlements (BIS) is an international financial institution that is owned by member central banks. Its primary goal is to foster international monetary and financial cooperation while serving as a bank for central banks.
93% of CBs are interested in CBDCs
As the world increasingly explores the potential of CBDCs, with 93% of central banks engaged in CBDC-related work in 2022 according to a BIS survey, the manager noted the need for robust legal foundations to ensure their legitimacy.
He pointed out that nearly 80% of central banks face legal limitations or uncertainties regarding CBDC issuance under their current laws, and this must be addressed promptly to meet the evolving needs and expectations of the public.
“The current monetary system, based on cash and commercial bank money, continues to serve society well,” the manager said.
“But it needs to evolve. Cash use is declining. Users are increasingly demanding new forms of money.”
Three important frameworks
Agustin also highlighted three critical aspects that any CBDC legal framework must safeguard: user privacy and data protection, the integrity of the financial system, and the freedom for users to choose between CBDCs and other forms of money.
He added that there is also the challenge of adapting existing privacy and financial integrity safeguards to the digital realm while preserving individual choice in a rapidly evolving landscape.
In conclusion, the legal framework for CBDCs plays a pivotal role in ensuring their acceptance and functionality within society.
Carstens stressed the urgency of addressing these legal issues promptly to facilitate the responsible and efficient deployment of CBDCs, meeting the public’s growing expectations for modern digital currencies.
Cash and digital money
Speaking about the complementary nature of cash, he said that “a retail CBDC may be expected to be available alongside cash. It would be one of a menu of options available to users, which should continue to include both cash and commercial bank money.”
“A central bank that introduces a CBDC should increase the choices for society, not diminish them. The legal framework will play an important role in ensuring this is the case,” he added.