Developing national digital currencies are facing a significant risk due to a lack of legal authority to issue them in many parts of the world, according to the head of the Bank for International Settlements (BIS), Agustin Carstens. While most countries have laws regulating banknotes, coins, and credit balances, a recent paper by the International Monetary Fund (IMF) revealed that nearly 80% of central banks are either not permitted to issue digital currencies under existing legislation or operate under unclear legal frameworks.
Carstens highlighted the importance of rectifying this issue, stating that the public expects forms of money that meet their needs and expectations. Central banks around the world are increasingly exploring the development of central bank digital currencies (CBDCs) as a way to modernize money and keep pace with the features offered by cryptocurrencies. Eleven countries have already launched their own digital currencies, and the European Central Bank is expected to receive approval next month to begin work on a digital euro.
Carstens emphasized that central banks have a mandate to meet public demands and have made substantial investments in CBDC development. However, the lack of clear and updated legal frameworks poses a significant hindrance to the deployment of digital currencies.
Efforts to address these legal issues need to begin promptly and proceed with urgency, Carstens stressed. The BIS, as the overseeing body of much of the global CBDC test work, is playing a crucial role in coordinating and guiding these efforts.
The development of national digital currencies has the potential to revolutionize the financial landscape, offering greater efficiency, transparency, and financial inclusion. However, in order to realize these benefits, it is crucial for countries to establish clear and robust legal frameworks that empower central banks to issue and govern digital currencies effectively.
In conclusion, the risk faced by developing national digital currencies due to a lack of legal authority is a matter of great concern. The calls made by Agustin Carstens to rectify this issue and establish clear legal frameworks are essential for the successful implementation of digital currencies. Central banks, governments, and international organizations must work collaboratively to navigate these legal challenges and unlock the full potential of digital currencies in the global economy.
