The current monetary system “needs to evolve,” according to a speech from Agustin Carstens, the general manager of the Bank of International Settlements.
He did, however, note that the current monetary system works currently as it stands. The evolution includes the implementation of a central bank digital currency (CBDC).
Carstens’ speech comes as some central banks, such as the Bank of Canada, have come forward to say that “significant” barriers remain before it can issue a CBDC, and the need is not yet there.
However, back in August, the Bank of Canada added that it is “committed” to being ready to focus on a CBDC “should the need arise.”
“Central banks have a responsibility to meet the public’s demands and drive innovation in money and the financial system more broadly. But they cannot do this alone. They must work closely with other stakeholders, including the private sector,” Carstens continued.
Read more: IMF advisor sees power in global ledger that works with CBDCs
A retail CBDC has “potential” to meet the needs of the public, which are also evolving. This means, he added, that the “legal framework must keep up.”
According to a 2022 BIS survey, central banks exploring “some form” of CBDC rose to 93%. By the end of the decade, it expects roughly 15 retail CBDCs alongside nine wholesale CBDCs to be rolled out.
Read more: BIS lays out steps for ‘secure and resilient’ CBDC systems
But before CBDCs can be launched, Carstens says that the legal framework has to be updated. An IMF paper published in 2021 said that 80% of central banks are either not allowed to issue digital currency or are unsure due to unclear legal frameworks.
Carstens said that it “needs to be rectified” due to the “mandate” that central banks have to meet the needs of the public.
In order to get countries close to the issuance of CBDCs, “different legal systems approach these questions in different ways. It is for each jurisdiction to decide whether to issue CBDC and how to balance the rights and obligations of its users at a national level.”
Carstens also added that “international coordination and cooperation is critical” and that digital currencies that don’t interoperate would be “unfortunate.”
His thoughts echo those of other regulators, such as the Monetary Authority of Singapore, which said in June that interoperability was a focus area.
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Source: https://blockworks.co/news/bis-cbdc-legal-framework-monetary-system