By Hassan Mehmood (Saudi Arabia)
Augustin Carstens is working as the general manager for the Bank for International Settlements. He recently claimed that countries should have a defined legislative framework for CBDCs.
He maintained that it is unacceptable that Central Banks are unable to issue CBDCs in their jurisdictions on account of absence of proper CBDC related legislations. He emphasized that nations should introduced CBDC laws on a local scale.
It is important to note that BIS is the central unit for all the major Central banks in the world. It has been operational since 1930s and has 63 banks accounting for 95% of the world GDP. The Basel Committee which is the legislative branch of BIS consists of 45 Central banks hailing from 28 nations.
80% of the Central banks in world do not have a legislative approval for issuing CBDC under their current laws or their existing laws lack clarity on the matter. The remarks were noted by International Monetary Fund report.
BIS Chief Calls for Operational Development CBDCs
Speaking on the matter, Carstens further claimed that nations should introduce technical and operational framework to allow CBDC launch. He claimed that citizens of sovereign nations are demanding a digitized version of legal tender that can meet their expectations.
Also read:Speaking at a conference at Switzerland, he noted that there are many Central Banks that are running CBDC pilots, researches, and technical infrastructure.
He further noted that in 2022, 93% of all the member Central banks at BIS were working on a local CBDC project in some capacity. He said that these statistics were noted in a survey conducted by BIS officials last year.
Furthermore, BIS is also working on multiple CBDC tests and invited various nations to work on local CBDC design. Central banks are working on issuing two different types of CBDCs for retail investors and wholesale.
BIS Uses DeFi to Conduct Wholesale CBDC Transaction Tests
The BIS is conducting wCBDC tests using participants from Singapore, France, and Switzerland to conduct wholesale CBDCs tests. A latest report on the matter has revealed that participating Central banks were able to complete cross-border transactions using DeFi technology.
The press release on the matter claimed that BIS is collecting data regarding the impact of CBDC transactions on international trade with more institutions launching native projects.
Automated Market Makers and CBDCs
On the other hand, BIS head of innovation hub Cecilia Skingsley has remarked that Automated Market Makers and CBDCs are a good combination. She noted that CBDCs were able to leverage smart contract technology that allows wCBDCs to operate in the same manner as DeFi tokens.
She noted that all the AMMs and other DeFi components can serve as the new structure for wCBDCs and financial markets.
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