According to IMF research, 80% of countries have laws that would not support the issuance of a retail central bank digital currency (CBDC). In a speech today, Agustín Carstens, General Manager of the Bank for International Settlements (BIS), urged countries to implement CBDC legislation ‘at pace’.
He outlined three core elements that any legal framework should implement: privacy, integrity and choice.
To demonstrate his point, Mr. Carstens used the example of someone paying for a bottle of water with cash anonymously. In contrast, if someone attempts to withdraw a large some of money from a bank, questions are asked. That’s both a demonstration of privacy as well as the limits imposed to protect the integrity of the system.
He said that the scrutiny was to prevent money laundering. Perhaps a more common use of large sums of cash is for tax evasion.
“The challenge we face is how to adapt existing privacy protections and financial integrity safeguards so that they can operate in a digital context,” said Mr. Carstens.
He highlighted the role of a retail CBDC is to enhance rather than reduce consumer choices, implying that the utility of cash should be maintained. “The legal framework will play an important role in ensuring this is the case,” he said.
Meanwhile, in Europe the draft digital euro legislation could become politicized. Previous EU parliamentary debates highlighted concerns by some parties that a CBDC could become a tool for government control over consumer spending.