Beyond the “will they or won’t they” stage of central bank digital currencies (CBDCs) — where the questions are existential, and certain central banks mull issuing them at all — lie the regulations.
Much of the regulatory landscape for CBDCs is being shaped beyond the borders of the United States. And at least some of the issues front and center in CBDC space are focused on privacy, on transaction sizes and just how CBDCs would co-exist, complement, or in some cases even compete with traditional banking structures.
All eyes, per usual, are on China, which has been at the vanguard of CBDC issuance and use cases in commercial and retail settings.
And as noted in this space late last month, in further evidence of the inroads CBDCs are making in the Chinese economy, UnionPay is poised to launch a self-service platform for merchants who want to use the digital yuan.
Read also: UnionPay Debuts Self-Service Network for Merchants to Add Digital Yuan Options
Discussions on Taxes
Perhaps not surprisingly, tax policy is instrumental in guiding how cryptos are embraced, yes, but also CBDCs. The Organization for Economic Cooperation and Development (OECD) has opened its own framework proposals on CBDC taxation for public comment. Among the proposals: amendments to common reporting standards that would wind up covering e-money providers that are not already depository institutions, as traditionally/currently defined.
Digital assets need more transparency when it comes to tax reporting, according to the OECD. Separately, European Central Bank Executive Board member Fabio Panetta said in a speech this week that a digital version of the euro should enable smaller transactions to be done anonymously (and not be subject to AML scrutiny, as would be seen with bitcoin, etc.).
Tax policy is also under discussion in India, and we contend that developments in that country are paving the way for bitcoin and its brethren to be deemed less attractive, perhaps in favor of CBDC down the line. Residents would, under new legislation, pay capital gains taxes of 30% on crypto transactions.
Read more: Today in Crypto: India Passes Crypto Tax Legislation; Deloitte, Coinbase to Acquire Brazil’s 2TM
And as for the international cross-pollination that is becoming a hallmark for CBDCs, and with an eye on infrastructure: The initial progress of Project Dunbar is tied to BIS and four central banks — Australia, Malaysia, South Africa and Singapore, as well as several commercial banks — and has been tied to pilots and to cross-border payments, and blockchain too. Interoperability will be key.
Read also: Beyond Project Dunbar’s Shared Platform, Unknowns Loom for Central Banks, CBDCs