Agustín Carstens, the general manager of the Bank for International Settlements (BIS), underscores the critical importance of legal frameworks that safeguard user privacy and uphold the freedom to choose between central bank digital currencies (CBDCs) and other forms of money. According to Carstens, such legal frameworks will play a pivotal role in driving the adoption of CBDCs.
Speaking at the BIS Innovation Hub conference in Switzerland on Sept. 27, Carstens emphasized the centrality of legal frameworks in the development and global proliferation of CBDCs. He stated,
“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.”
Carstens also pointed out that different countries have varying laws that specify the types of money their central banks can issue, typically encompassing physical cash and credit balances on current and reserve accounts. He cited an IMF paper from 2021, which revealed that nearly 80% of central banks either lack the legal authorization to issue a digital currency or operate within a vague legal framework.
Furthermore, Carstens referred to a BIS study indicating that 93% of the world’s central banks are actively involved in the development of CBDCs at different stages. Given the global interest in digital fiat currencies, he asserted that outdated or unclear legal frameworks that hinder their deployment are unacceptable.
Carstens also addressed concerns about the potential misuse of CBDCs for enforcing social credit scores. He emphasized that a CBDC must operate within a framework that defines rights and obligations. He outlined three core elements as imperative: preserving the privacy of CBDC users and their data, ensuring the integrity of the financial system, and protecting people’s right to choose between a CBDC and other forms of money.
Carstens recognized that different countries exhibit varying trends in cash usage and the adoption of digital payments. In this context, he highlighted that a retail CBDC should coexist alongside cash and commercial bank money to offer increased choices to society.
In the ongoing development of CBDCs, China remains a prominent driver with its digital yuan program. The latest update to its pilot e-CNY app allows tourists heading to China to pre-charge their digital yuan wallets using Visa and Mastercard payments.
Meanwhile, in the United States, the CBDC Anti-Surveillance State Act bill, aimed at preventing the U.S. Federal Reserve from issuing a CBDC, passed a vote in the House Financial Services Committee on Sept. 21. The bill is now set to proceed to Congress as it aims to counter “state control over currency.”
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