A legal framework that ensures user privacy and freedom to choose between central bank digital currency (CBDC) and other forms of currency will be key to driving CBDC adoption, the president of the Bank for International Settlements said.
Speaking at the BIS Innovation Center conference in Switzerland on September 27, BIS General Manager Agustín Carstens emphasized that the legal framework remains a key consideration for the development and diffusion of CBDC globally:
“Most fundamentally, the legitimacy of a CBDC will derive from the central bank’s legal authority to issue it. This authority must be firmly based on law.”
He added that different countries’ laws dictate the type of currency their central banks can issue, which typically includes physical cash and credit balances in current and reserve accounts:
“According to a paper published by the IMF (International Monetary Fund) in 2021, nearly 80% of central banks either do not allow the issuance of digital currencies under existing laws, or the legal framework is unclear.”
Carstens also mentioned a study by the Bank for International Settlements, which showed that 93% of the world’s central banks are involved in developing CBDC at various stages. Given that most of these institutions are actively seeking to meet public demand for digital forms of fiat currency, the head of the Bank for International Settlements said that outdated or unclear legal frameworks that hinder their deployment are unacceptable.
Criticisms regarding the possible misuse of CBDC to perform social credit scoring have also been addressed. Carstens believes that CBDC needs to operate within a clear framework of rights and obligations.
Related: US Democrats strongly support CBDC global leadership, Republicans worry about the ‘dark side’
The general manager of BIS said that three core elements are imperative, including protecting the privacy of CBDC users and their data, the integrity of the financial system, and the right of people to choose between CBDC and other forms of currency.
Carstens pointed out that different countries have different trends in the use of cash and the adoption of digital payments, and retail CBDC is likely to coexist with cash and commercial bank funds:
“Central banks introducing CBDC should increase society’s choices, not reduce them.
As Cointelegraph previously reported, China continues to promote the development and use of its digital yuan CBDC plans. The latest update to its pilot e-renminbi app now allows travelers to China to pre-load their digital renminbi wallets using Visa and Mastercard payment methods.
At the same time, in the United States, the CBDC Anti-Surveillance State Act, which aims to prevent the Federal Reserve from issuing CBDC, was voted by the House Financial Services Committee on September 21. The bill is expected to go before Congress next to combat “state control of currency.”
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