Agustín Carstens, the President of the Bank for International Settlements (BIS), has emphasized the importance of establishing a legal framework that safeguards user privacy and allows the freedom to choose between central bank digital currencies (CBDCs) and other forms of currency. Carstens made these remarks during the BIS Innovation Center conference in Switzerland on September 27, underlining that a robust legal foundation is crucial for CBDC adoption on a global scale.
Carstens stated that a CBDC's legitimacy hinges on the central bank's legal authority to issue it, which should be firmly rooted in law. He noted that existing laws in different countries dictate the types of currency their central banks can issue, typically encompassing physical cash and credit balances in current and reserve accounts. Highlighting an IMF paper from 2021, he pointed out that nearly 80% of central banks either prohibit digital currency issuance under current laws or possess unclear legal frameworks.
Furthermore, Carstens cited a BIS study revealing that 93% of the world's central banks are involved in CBDC development to some degree. Given that most of these institutions aim to address public demand for digital fiat currency, he argued that outdated or vague legal frameworks impeding their deployment are unacceptable.
In addressing concerns about potential misuse of CBDCs for social credit scoring, Carstens emphasized the need for CBDCs to operate within a well-defined framework of rights and responsibilities. He outlined three core elements: safeguarding CBDC users' privacy and data, ensuring financial system integrity, and preserving individuals' right to choose between CBDCs and other forms of currency.
Carstens acknowledged that different countries exhibit varying trends in cash use and digital payment adoption. As a result, he anticipated that retail CBDCs would coexist with cash and commercial bank funds, increasing rather than limiting society's options.
In China, the development of its digital yuan CBDC continues, with the latest update allowing travelers to preload their digital renminbi wallets using Visa and Mastercard payment methods. Meanwhile, in the United States, the CBDC Anti-Surveillance State Act aims to prevent the Federal Reserve from issuing CBDCs and recently passed the House Financial Services Committee vote, heading to Congress to address concerns about "state control of currency."
