The Law Needs To Evolve To Accommodate CBDC: BIS Chief
In a recent report, Agustin Carstens, the Bank of International Settlement (BIS) general manager, suggested that the law must be updated in order to support the deployment of the central bank digital currency globally.
According to the report, Carstens pointed out that the outdated legislation significantly prevents the global adoption and launching of the CBDC. Hence, he suggested that the rules must be reviewed and updated to accommodate and regulate the deployment and use of central bank digital currency across the world.
While speaking at a recently concluded conference in Switzerland, the BIS chairman highlighted the advantages CBDCs offer the global economy while admonishing the leaders worldwide to update their regulations to facilitate the growth of the central bank-issued virtual currency.
Carstens explained that people desire their fiat money to be transformed into digital and programmable currency in order to be able to send and receive it across borders safely, cheaply, and quickly.
Carstens Advocates CBDCs Over Other Cryptos
The chief appraised the potential and opportunity the private market crypto assets like Bitcoin and Ethereum offer. However, he thinks that without the support and protection of the central banks and other relevant financial institutions, such crypto assets can not be money.
In addition, Carstens also remarked on stablecoins, claiming that this category of crypto assets also failed to meet the bill’s standard in his perspective, as they are not 100% stable. For context, stablecoins are crypto assets whose value is pegged to a fiat currency like euro or USD, precious metal like gold, or other stable crypto assets like Bitcoin in order to maintain their price stability.
Corroborating Agustin Cartsen’s assertions, one of the leading crypto stablecoins, Circle’s USDC, recently lost its peg to the United States dollar earlier this year. In addition, UST stablecoin, issued by Terraform Labs, crashed in November Last year, leading to a massive ripple effect whose stock is still felt in the global crypto markets recently.
On the contrary, the chief stated that the wholesale central bank digital currency protocol, which the traditional banking system adopted, offers a lot of potential regarding risk management and transaction automation. He added that retail CBDCs can also help to facilitate financial inclusion and make international transactions cheaper, faster, and more secure.
Carstens Urges Regulatory Framework Updates
In his speech, Carstem highlighted that retail CBDCs can be issued alongside fiat currencies to offer a digital alternative to coins and banknotes to the public. According to the report, the International Monetary Fund stated in 2021 that about 80% of central banks worldwide are prevented from issuing CBDCs or are guided by ambiguous regulations on CBDCs.
Referencing the assertion, Carstens said that to think outdated or unclear laws prevent the world’s central banks from issuing CBDCs is unacceptable. He urged concerned authorities to start working on creating necessary regulations as soon as possible to support the issuance of CBDCs.
Last year, CPMI carried out a survey that showed that 93% of central banks across the globe have already begun working on their CBDCs. The survey pointed out that about half of them have deployed pilot stages for their digital currencies; a few, like China, have already issued theirs.
US Congress Divides On CBDC Issuance
In addition, the report showed that CBDCs are debated in the United States Congress in the same way as other crypto assets. However, unlike cryptocurrencies, which received significant acceptance in Congress, reports showed that the Democrats support CBDCs, which the Republic called for it to be banned altogether.
According to the report, the Republicans largely consider CBDCs as a government-controlled surveillance tool that can be used to monitor citizens’ daily transactions. However, Carstens believes this can be solved if the upcoming regulatory framework on CBDCs can include customers’ privacy in its core component.
Furthermore, the chief pointed out that each region has the decision to make whether CBDCs would be issued in their territory or not. However, he pointed out that it would be disastrous if the world ends up with multiple CBDCs that cannot interoperate globally.
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