The Bank for International Settlements (BIS) recently directed nations around the world to set up legal frameworks for central bank digital currencies (CBDC).
Augustin Carstens, General Manager of the BIS, recently delivered a management speech in Switzerland, where he underscored the need for an appropriate legal framework for CBDCs. According to the BIS official, unclear or outdated legal frameworks could cause a hindrance in the deployment of CBDCs.
Speaking on the role of Central Banks in promoting CBDCs, Carstens stated:
Central banks have a responsibility to meet the public’s demands and drive innovation in money and the financial system more broadly. But they cannot do this alone. They must work closely with other stakeholders, including the private sector.
Citing an International Monetary Fund Paper from 2021, Carstens stated that nearly 80% of central banks were not allowed to issue a digital currency under existing laws. He urged countries to update and modernize their existing legal frameworks in a way that ensures legitimacy, privacy, integrity, and choice in a digital context.
According to the BIS official, at least three core elements of CBDCs had to be preserved, namely privacy, integrity, and choice. The privacy of CBDC users and the protection of their data need to be ensured, in addition to the integrity of the financial system. Additionally, users should also have the ability to choose between CBDC and other forms of money.
The international institution is known for its influence on traditional banking and has engaged in the crypto space over the past few years. The BIS Innovation Hub is reportedly engaged in legal projects to provide aid in similar endeavors. In conclusion, Carstens acknowledged the endless differences between the legal and economic landscapes of countries around the world and recommended international coordination and cooperation for the same.
