Global financial organizations and 20 of the world’s leading economies will cooperate to establish official standards for the issuance and regulation of central bank digital currencies (CBDCs).
A report published today announced that the World Bank, the International Monetary Fund (IMF) and the Bank for International Settlements (BIS) will develop rules and guidelines for the use of CBDC banking systems.
The report states that the IMF and the World Bank will acquire the technical capabilities necessary to facilitate CBDC transactions across borders. Both institutions aim to have this functionality in place by the end of 2025.
The G20’s Financial Stability Board (FSB) said countries are exploring possibilities for new CBDCs, the regulation of stablecoins, and multilateral platforms to address issues related to cross-border transactions. The FSB intends to resolve these issues “without compromising supervisory and regulatory minimum standards to contain risks to monetary and financial stability.”
Banks in Japan, Europe and North America have emphasized that CBDCs should be designed to be interoperable with existing fiat currencies. They should offer a user experience similar to cash and make it easy for people to make payments without incurring fees.
CBDC systems should also be designed to connect with legacy financial technologies, support high-volume, instant 24/7 transactions, be resilient to cyberattacks, and comply with existing regulations that govern fiat currencies.
According to the report, CBDCs should improve cross-border remittances and counter the effects of private digital currencies such as Facebook’s Libra. While CBDCs may be built on distributed ledger technology, they will differ from cryptocurrencies because they are not designed to be as anonymous or as decentralized.
G7 halts Libra launch until stablecoin rules are in place
Yesterday, central bankers and finance ministers from the Group of Seven (G7) agreed that no global stablecoin project should go live until appropriate regulatory, legal and supervisory requirements are established for its operation.
Representing the United States, Japan, Canada, Germany, France, Italy and the United Kingdom, the G7 said all global stablecoin initiatives must be paused until adequate oversight is in place. The group’s primary concern is ensuring stablecoins comply with anti-money laundering laws, consumer protection standards and other regulatory requirements.
This G7 position could mean that Facebook’s Libra stablecoin faces substantial regulatory obstacles worldwide. Last year, France joined with Germany, Italy, Spain and the Netherlands to block Libra’s launch in Europe. Now, Libra appears to face even greater challenges at the global level.