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BIS Chief Urges Countries to Establish Legal Frameworks for CBDCs

  • September 28, 2023

According to the report, in some countries, central banks are directing their attention toward wholesale CBDCs, which are designed to facilitate the settlement of interbank transfers and other wholesale transactions.

Agustin Carstens, the General Manager of the Bank for International Settlements (BIS), has urged countries to take immediate action in establishing clear legal frameworks to support the implementation of Central Bank Digital Currencies (CBDCs).

The BIS chief made this appeal during the BISIH-FSI conference held today in Switzerland. The bank published Carstens’ speech during the event on September 27, shedding light on a critical issue hindering the adoption of CBDCs worldwide.

80% of Central Banks Face Issues with CBDC Implementation

According to the report, approximately 80% of central banks currently face restrictions preventing them from issuing CBDCs due to existing legal constraints or the absence of explicit legal guidelines. This finding corroborates a 2020 International Monetary Fund (IMF) paper.

Carstens stressed the urgency of rectifying the situation, noting that the public rightfully expects currencies that cater to their evolving needs and demands.

“This needs to be rectified. The public rightly demands forms of money that meet their needs and expectations,” Carstens said during the conference.

Central banks across the globe have been actively investing in exploring and addressing the technical and operational prerequisites for implementing CBDCs.

In 2022, a survey conducted by the BIS revealed that a remarkable 93% of central banks were actively involved in various CBDC-related initiatives. The BIS, itself, has conducted numerous CBDC experiments and called for increased international cooperation in designing CBDC frameworks.

According to the report, in some countries, central banks are directing their attention toward wholesale CBDCs, which are designed to facilitate the settlement of interbank transfers and other wholesale transactions. In contrast, some central banks are actively exploring the concept of retail CBDCs.

Carstens noted that these retail CBDCs have the potential to coexist with traditional fiat currencies, providing the public with a digital substitute for conventional banknotes and coins.

Central Banks Ensure Money Accessibility

The BIS chief also said that as the defender of the value of money, the banks have a responsibility to ensure that money is available in forms that meet society’s needs and expectations.

Therefore, he noted that it is unacceptable for unclear or outdated legal frameworks to impede the deployment of CBDCs. The BIS chief called for immediate, concerted efforts to rectify these issues and emphasized the necessity for swift progress in this critical area.

“It is simply unacceptable that unclear or outdated legal frameworks could hinder their deployment. The work to address these issues needs to begin in earnest. And it needs to proceed at pace,” Carstens said.

Meanwhile, the BIS has been making efforts to ensure the safe landing of CBDCs. On July 7, the bank unveiled a security framework called the Polaris framework, which includes seven stages of security, such as Prepare, Identify, Protect, Detect, Respond, Recover, and Adapt, to assist central banks in ensuring the safety of digital currencies.

At the time, the bank emphasized the importance of safeguarding CBDCs as critical national infrastructure, with cyberattacks against them being a top-five risk due to their potential to erode trust and have reputational, operational, and legal repercussions.

That same month, the bank revealed that 24 central banks will issue their own CBDCs in 2030.

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Chimamanda U. Martha

Chimamanda is a crypto enthusiast and experienced writer focusing on the dynamic world of cryptocurrencies. She joined the industry in 2019 and has since developed an interest in the emerging economy. She combines her passion for blockchain technology with her love for travel and food, bringing a fresh and engaging perspective to her work.

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