It seems that the future of CBDCs (Central Bank Digital Currencies) is set to be greatly influenced by user privacy and the freedom to choose between centralized digital currencies and other forms of money. This recent emphasis was brought to light by the general manager of the Bank of International Settlements (BIS), Agustín Carstens.
Carstens highlighted the indispensable role of legal frameworks that protect CBDC user privacy and maintain monetary freedom of choice. These will be key in driving the mass adoption of CBDCs. Interestingly, he stressed upon the legitimacy of a CBDC stemming from the legal authority of the central bank to issue it, which needs to be rooted firmly in the law.
Investigating this context, a study by the IMF in 2021, revealed that approximately 80% of central banks currently lack legislative permission to issue a digital currency. The regulations around this are somewhat murky. Parallel to this, the BIS conducted a study indicating that a staggering 93% of the world’s central banks are currently engaged in developing CBDCs at varying stages.
Potential misuse of CBDCs in regard to social credit scores or standings by their issuers was also a topic of discussion. Thus rendering the need for function with a framework of defined rights and obligations imperative. In Carstens view, three core elements are crucial: preserving the privacy of CBDC users and their data, the integrity of the financial system, and the right of people to choose between a CBDC and other forms of money.
Consideration was given to the variety of trends in different countries relating to the use of cash and adoption of digital payments. It was projected that a retail CBDC would likely coexist alongside cash and commercial bank money. As a case in point, the latest update on China’s pilot e-CNY app now allows tourists heading to China to pre-charge their digital yuan wallets using Visa and Mastercard payment.
Simultaneously, the CBDC “Anti-Surveillance State Act” bill, aimed at preventing the U.S. Federal Reserve from issuing a CBDC, recently passed a vote in the the House Financial Services Committee as it seeks to fight “state control over currency”.
Overall, the intricate dynamics between privacy, choice, and regulation promise to shape the landscape of CBDCs and their adoption. From a bird’s eye view, the present furor surrounding CBDCs and legal frameworks signifies a critical phase in the narrative of financial transformation stirring in the wind of our digital economy.
Source: Cointelegraph
