CBDC frameworks must ensure privacy, integrity and choice of users, says BIS manager
The BIS general manager believes that it is time to update and modernise the existing legal framework to ensure legitimacy, privacy, integrity and choice in CBDCs
Bank for International Settlements (BIS) General Manager Agustin Carstens. Image: Fabrice COFFRINI/ AFP
On September 23, at the BIS Innovation Hub-Financial Stability Institute conference in Basel, Switzerland, Agustín Carstens, general manager of the Bank for International Settlements (BIS), underscored the importance of legal frameworks in the advancement and evolution of Central Bank Digital Currencies (CBDCs) around the world.
A legal framework is fundamental in establishing legitimacy and fostering trust in money. The same applies to CBDCs or any other currency. According to an IMF paper published in 2021, nearly 80 percent of central banks are either not allowed to issue a digital currency under their existing laws, or the legal framework is unclear. This needs to be rectified, the BIS General Manager opines.
Agustin finds it unacceptable that unclear or outdated legal frameworks could impede the deployment of CBDCs. He believes that addressing these issues should commence immediately and progress rapidly.
The BIS General Manager said a CBDC needs to function within a clearly defined rights and obligations framework. The privacy of users, the integrity of the financial system and the ability of users to choose between forms of money are three core elements that must be preserved.
He highlighted that cash usage is declining with time, and users are increasingly demanding new, versatile forms of money. In this context, he points out, “Increasingly, central banks around the world are examining how CBDCs could address these demands. According to a CPMI survey, in 2022, 93% of central banks were engaged in some form of CBDC work. Of these, more than half were running concrete experiments or working on pilots.”
