G7 Finance Ministers and Bankers Undertake Tips for Central Financial institution Digital Currencies – Finance Bitcoin Information
Any digital currency issued by a central bank must support financial and monetary stability, G7 finance leaders have insisted. State coins should also ensure privacy, transparency and data protection, officials said. The forum adopted 13 public policy principles for retail digital currencies, emphasizing that “CBDCs are not ‘crypto assets'”.
CBDCs must “do no harm to stability,” say the G7 chief financial officers
Finance officials from the major economies of the Group of Seven (G7) recognized the potential benefits of innovation in digital money and payments and addressed relevant public policy and regulation issues at their recent meeting, which also included over a dozen guidelines for spawned central bank digital currencies (CBDCs). . In a published statement, participants reiterated:
Any CBDC should be based on our longstanding public commitments to transparency, rule of law, and sound business conduct.
A sovereign digital currency to be used by households and businesses must “support, not harm,” a central bank’s ability to maintain monetary and financial stability, the G7 chief financial officers said after Wednesday’s meeting. “A CBDC would complement cash” and could serve as an “anchor for the payment system,” they added. It should also meet “strict standards” of privacy, transparency and data protection and be resilient to various risks such as cyber threats, fraud and illegal use.
The G7 finance ministers and central bankers recognize the role CBDCs could play in improving cross-border payments. At the same time, the senior officials recognize their shared responsibility to minimize what they call “harmful effects on the international monetary and financial system”.
In discussing innovations in personal digital money, policy makers reaffirm their commitment to ensure that developments there are safe and consistent with the group’s policy objectives. If not properly regulated, a stablecoin could pose significant risks to financial stability. They point out that volatile, uncovered cryptocurrencies could not be widely used as a means of payment.
G7 issues 13 public policy principles for retail CBDCs
A report published by the Intergovernmental Forum further highlights the differences between digital currencies issued by central banks, on the one hand, and cryptocurrencies and stablecoins, on the other. “CBDCs are not ‘crypto assets’,” emphasize the group’s chief financial officers, pointing out that the latter are not issued by a central bank and that fiat-backed digital coins are a liability of private companies. However, participants from both the public and private sectors could be involved in the broader infrastructure of CBDCs.
The authors point out that no monetary authority in the G7 countries has yet decided to issue their own digital currency and have structured their recommendations by formulating 13 principles of public order for retail CBDCs, which are intended to facilitate political deliberations. National governments and international organizations can refer to these guidelines, which have been divided into two categories: “Fundamentals and Opportunities”.
Monetary and financial stability is one of the basic principles. By designing a CBDC that supports public policy goals, central banks can use digital currency as a tool to improve stability and manage the impact on financial intermediaries, the report said. In the context of the legal and governance framework, G7 officials stress the need to uphold the rule of law and maintain economic governance. Politicians emphasize:
Appropriate national legal, regulatory, supervisory and supervisory frameworks are essential to ensure trust, resilience, security and trust in any CBDC.
Data protection is another important principle that requires regulators to ensure accountability for the protection of user data and transparency about the way information is secured and used. This is seen as essential to having confidence and confidence in a CBDC. Operational resilience and cybersecurity is the fourth principle that calls on all units involved in a CBDC ecosystem to develop data security and cybersecurity strategies.
Competition is a key, and G7 CFOs believe that “CBDCs should coexist with existing means of payment and operate in an open, secure, resilient, transparent and competitive environment that encourages choice and diversity in payment options.” If they are expected to provide more accessible, faster and cheaper payments, the principle of illicit finance places an emphasis on the obligation to curb their use to facilitate crime.
Spillover should be addressed to avoid risks of damage to the international monetary and financial system, including the monetary sovereignty and financial stability of other countries. The energy consumption of a CBDC is another important aspect. The energy and environmental principle provides for the establishment of efficient infrastructures for digital currencies that support the international commitment to a “net zero” economy.
According to the G7 report, CBDCs offer a number of opportunities in areas such as payments to and from the public sector and cross-border functions where the new digital fiat currencies can potentially reduce friction. The principles of the Opportunity category, which the Group of Seven recommends that monetary authorities consider, also include the digital economy and innovation, international development and financial inclusion.
The new G7 guidelines come after a meeting in June where the group’s financial leaders agreed to publish a set of common rules for central banks’ digital currencies. The US Federal Reserve, the European Central Bank, and the Bank of Russia are among dozens of monetary authorities currently working on the development and issuance of CBDCs. The most advanced project to date has the People’s Bank of China, which has already started numerous attempts with the digital yuan.
Do you expect the monetary authorities to follow the public policy principles for CBDCs set out by the G7 chiefs of finance? Let us know in the comment section below.
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