Countries need clear and updated legal frameworks for deploying CDBCs, the Bank for International Settlements said.
revealed that 93% of central banks are actively involved in various aspects of CBDC development. This would suggest jurisdictional legal frameworks are trailing behind advancements made by central banks in the CBDC space.
Carstens stated that a CBDC's legitimacy comes from the central bank's legal authority to issue it."That authority needs to be firmly grounded in the law," he added. Referencing how money is a social construct, he stressed the importance of legal frameworks to underpin the legitimacy of money."Without the law, money cannot function," the BIS General Manager added.
Carstens called for jurisdictional legal frameworks to be interoperable with other jurisdictions."It would be unfortunate if we ended up with a fragmented system and legal framework in which different digital currencies don't interoperate," he added.According to Carstens, any legal framework should have core elements. He added that these must strike a balance between protecting the user and upholding the integrity of the financial system as a whole.
He added that these"new forms of private money" do not offer the backing and protection of central banks as a lender of last resort or supervision by regulatory bodies."Even stablecoins do not assure a stable value. They do not and cannot meet the standards the public expects of money," he added. © 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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