The head of the Bank for International Settlements (BIS) says the global monetary system is evolving, and work must be done to ensure central banking digital currencies (CBDCs) are ready for mass adoption.
In a new speech, Agustín Carstens says it’s the responsibility of central banks to create a strong legal framework for CBDCs that ensures legitimacy, privacy, integrity and choice for users.
While the current monetary system based on cash and commercial bank money “continues to serve society well,” Carstens says it’s time to evolve.
“It needs to evolve. Cash use is declining. Users are increasingly demanding new forms of money. Advances in digital services are highlighting shortcomings in existing systems, while raising expectations about what money should do. People want their money to be digital and programmable. They want to be able to transfer it across borders quickly, cheaply and safely.”
The former economist cites CBDCs as a coming improvement, and says the need to protect people’s privacy and preferences is important.
He calls for international cooperation in creating a new digital system that’s connected and interoperable.
“In my view, at least three core elements must be preserved: The privacy of CBDC users and the protection of their data; the integrity of the financial system; and the ability of users to choose between CBDC and other forms of money…
At the same time, international coordination and cooperation is critical. It would be unfortunate if we ended up with a fragmented system and legal framework in which different digital currencies don’t interoperate.
The BIS is committed to continuing to support work in this space and to providing a forum for these important discussions. Work is ongoing through the legal projects led by the BIS Innovation Hub but gatherings like this are also invaluable in informing national and international work.
By building a robust legal framework, we can all ensure that CBDCs will flourish.”
Carstens, a vocal critic of crypto, says that cryptocurrencies, including stablecoins, are “not money” and should not be the next iteration of the financial system since they don’t have the backing of a centralized banking institution.
“The private sector has sought to meet these demands by issuing new forms of private money. Examples include unbacked cryptocurrencies and stablecoins. While they have achieved some popularity as speculative investments, these financial…
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