Leaders in finance from the G7 major economies member states have issued new guidelines regarding all digital currencies issued by central banks. Over a dozen guidelines for CBDCs, or central bank digital currencies, were outlined at a recent meeting of financial leaders.
The key premise underpinning these guidelines is that digital currencies should do no harm to the ability of a central bank to maintain financial and monetary stability. You can view a definition of CBDCs in the PDF attachment to this post.
Jerry Cole, Red Rose co-founder, is a financial expert with many years of experience working within the global financial sector. Jeremy Cole co-founded Red Rose – a company focusing on digital and e-cash transfer solutions – in 2014, and he continued to serve as Director until 2021.
The Role of CBDCs
Members of G7 recognised the role that CBDCs could have to play in financial transactions such as cross-border payments and as a complement to cash. Guidelines were set out to help ensure that CBDCs could be introduced without causing harm to central banks and the international financial and monetary system.
It was agreed that while CBDCs should be developed, there must be guidelines in place to ensure rigorous standards would be met across areas such as data protection, privacy, transparency, risk management and illicit use.
The infographic attachment looks at some of the top statistics for CBDCs worldwide.
The Introduction of CBDCs
A BIS survey of central banks conducted in 2021 found that 14% were already deploying pilot CBDC projects, 60% were currently experimenting with CBDC technology, and 86% were involved in active research as to the potential of CBDCs.
The first nationwide CBDC in the world was introduced in the Bahamas in 2020. The UK is now exploring the potential for a CBDC according to the Treasury and the Bank of England, which have together formed a CBDC Taskforce.
Policy Principles
At present, none of the G7 nations has reached the point of issuing a CBDC. However, the policy principles have been put in place to govern monetary and financial stability prior to the establishment of CBDCs and to facilitate policy deliberation.
There are 13 public policy principles in total, exploring aspects of CBDCs such as privacy, data protection, cyber security, competition, transparency and diversity in payment options.
The embedded short video looks at what cyber security is in relation to the global financal industry.