G7 leaders favour CBDCs provided they ‘support and do no harm’ to central banks

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G7 leaders favour CBDCs provided they ‘support and do no harm’ to central banks
G7 has issued guidelines to address central bank digital currencies (CBDCs)BI India

  • G7 countries are in favour of central bank digital currencies (CBDCs) but one primary condition.
  • The implementation of CBDCs should not hamper the ability of central banks to maintain monetary and financial stability.
  • “No G7 authority has yet taken the sovereign decision to issue a CBDC and careful consideration of the potential policy implications will continue,” said the G7.
The G7 countries — the US, UK, Japan, Italy, Germany, France, and Canada — agree that central bank digital currencies (CBDCs) have significant benefits to offer. However, they have one primary condition in the public policy principles laid out this week. The blockchain technology should ‘do no harm’ to central banks and the existing monetary system.

Just because fiat currencies, like the US dollar or the pound, would be issued digitally does not mean that they should hamper the mandate of central banks of financial stability.

“Any CBDC must support, and ‘do no harm’ to, the ability of central banks to fulfil their mandates for monetary and financial stability.”

Excerpt from G7 finance ministers and central bank governor’s statement on CBDCs and digital payments

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According to the grouping of advanced economies, the issuance of a CBDC would complement cash — acting like a liquid, safe settlement asset and an anchor for the payments system. And, the basis of its existence should be grounded in transparency, the rule of law and sound economic governance.

“No G7 authority has yet taken the sovereign decision to issue a CBDC and careful consideration of the potential policy implications will continue,” said the G7. The inter-governmental political forum also asserted that the CBDC ecosystem needs to be secure against cyber, fraud and other operational risks.

The need for a set of international standards
While individual countries are working to regulate cryptocurrencies, having an international structure in place is essential, according to experts. This is because the nature of cryptocurrencies is global — CBDCs or otherwise — especially since one of the main problems of the global monetary system that these digital currencies are looking to solve is remittances.

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According to the G7, there is a shared responsibility of all member nations to minimise harmful spillovers to the international monetary and financial system.

“We note the importance of considering interoperability on a cross-border basis given the potential role for CBDCs in enhancing cross-border payments.”

Excerpt from G7 finance ministers and central bank governor’s statement on CBDCs and digital payments

The G7’s stance on CBDCs echo a similar statement made by the larger G20, which includes India, reiterating that no global stablecoin project should begin operation until it addresses legal, regulatory and oversight requirements.

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