Nearly every country on Earth has a central bank digital currency (CBDC) project in play.
However, nearly 80% of the world’s central banks are either forbidden by law to issue a digital currency or operate in a country where the laws are unclear. And that needs to change, Agustin Carstens, general manager of the Bank for International Settlements (BIS), said in a speech Wednesday (Sept. 27).
“Central banks have a mandate to meet those demands and have made significant investments to address the technical and operational requirements for CBDCs,” Carstens said during the BISIH-FSI conference on legal aspects of CBDCs in Basel, Switzerland.
“It is simply unacceptable that unclear or outdated legal frameworks could hinder their deployment.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’ speech also addressed consumer demand for new forms of money, and the private sector’s attempts to meet those demands with cryptocurrencies and stablecoins.
“While they have achieved some popularity as speculative investments, these financial instruments are not money,” he said, as they are not backed by or tied to a central bank or regulatory and supervisory framework.
“Even stablecoins do not assure a stable value,” said Carstens. “They do not and cannot meet the standards the public expects of money.”
The BIS released a survey in July that showed 93% of central banks involved in some sort of CBDC project, as uncertainty about short-term CBDC issuance is fading.
“The survey suggests that there could be 15 retail and nine wholesale CBDCs publicly circulating in 2030,” BIS said, pointing out that work on retail CBDCs has made more progress than wholesale coin projects.
But the BIS added that wholesale CBDCs could give financial institutions “new functionalities enabled by tokenization, such as composability and programmability.”
PYMNTS spoke earlier this month with James Wallis, vice president of central bank engagement at crypto solutions firm Ripple, about CBDC’s potential as a solution to bottlenecks and frictions in both retail and cross-border payments.
Wallis said CBDCs allow for pure, peer-to-peer (P2P) payments, cutting risks and paving the way for quicker transactions, making them well-suited for cross-border remittances.
In addition, the decentralized nature of blockchain, which upholds CBDCs, balances the need for the security and trust of central banks with the advantages and synergies of decentralization.
“One of the absolute key reasons to do blockchain is the ability to add additional functions and capabilities, relatively easily, on top of the core infrastructure … The list is almost as big as the imagination,” Wallis said. “It allows the private sector to really get in and start adding more use cases.”