G-7 Finance Officials Endorse Policy Principles for Central Bank Digital Currencies

G-7 Finance Officials Endorse Policy Principles for Central Bank Digital Currencies
(L-R) President of the European Council Charles Michel, U.S. President Joe Biden, Japanese PM Yoshihide Suga, British PM Boris Johnson, and Italian PM Mario Draghi pose for the Leaders official welcome and family photo during the G-7 Summit in Carbis Bay, Cornwall, on June 11, 2021. Leon Neal/WPA Pool/Getty Images
Katabella Roberts
Updated:

G-7 finance officials endorsed 13 public policy principles for central bank digital currencies (CBDC) on Oct. 13, noting that while electronic cash could support inclusion and innovation in an increasingly digital economy, the currencies also raise important questions regarding policy and regulation.

The G-7 countries consist of Canada, the United Kingdom, the United States, France, Germany, Italy, and Japan.

The group met in Washington during the annual meetings of the International Monetary Fund and World Bank under the leadership of British finance minister Rishi Sunak, where they discussed CBDCs potentially being used as a digital form of central bank money alongside physical notes and coins.

“Innovation in digital money and payments has the potential to bring significant benefits but also raises considerable public policy and regulatory issues,” the G-7 finance ministers and central bankers said in a joint statement issued on Oct. 13.

“Strong international coordination and cooperation on these issues helps to ensure that public and private sector innovation will deliver domestic and cross-border benefits while being safe for users and the wider financial system.”

G-7 central banks and finance ministries are currently exploring how digital innovation can maintain access to and promote the use of CBDCs, noting that if issued as a form of central bank money, they could act as “both a liquid, safe settlement asset and as an anchor for the payments system.”

The group noted that CBDCs could prove to be integral for central banks in the future and that the design of any such currency must be capable of accommodating future payment needs.

The 13 principles laid out by G-7 officials focus on everything from competition to transparency to environmental issues relating to digital coins.

Officials noted that any CBDC should be “designed in a way that supports the fulfillment of public policy objectives and, more importantly, does not harm the central bank’s monetary and financial stability.”

They stated that the G-7’s values for the international monetary system should “guide the design and operation of any CBDC, namely observance of the rule of law, sound economic governance, and appropriate transparency.”

Regarding data privacy, officials called for “rigorous standards of privacy and accountability,” as well as transparency with how information will be secured and used, to ensure that the digital currency can be trusted.

Officials also endorsed operational resilience and cybersecurity, noting that any CBDC ecosystem must be “secure and resilient to cyber, fraud, and other operational risks.”

Bitcoin mining at BitFarms in Saint Hyacinthe, Quebec, on March 19, 2018. (Lars Hagberg/AFP/Getty Images)
Bitcoin mining at BitFarms in Saint Hyacinthe, Quebec, on March 19, 2018. Lars Hagberg/AFP/Getty Images

G-7 leaders pointed to competition, noting that CBDCs have to coexist with existing means of payments, and they should operate in an “open, secure, resilient, transparent, and competitive environment that promotes choice and diversity in payment options.”

With regards to the principle of illicit finance, leaders stated that any CBDCs will have to carefully integrate the need for “faster and more accessible, safer, and cheaper payments,” and there has to be a commitment to alleviate their use in facilitating any crime.

In an effort to tackle energy and environmental issues, officials said that the energy usage of any CBDC infrastructure needs to be as efficient as possible to support the international community’s shared commitments to transition to a so-called net-zero economy.

Bitcoin miners in particular have been facing growing scrutiny over the environmental impact of the process of “mining” the digital currency, which refers to the competitive process of mathematical computation through which the virtual currency is rewarded.

Bitcoin miners utilize warehouses of computers to solve computational problems to verify transactions, update, and maintain the bitcoin blockchain. In effect, the miners keep the bitcoin blockchain updated, and in turn, are compensated with new blocks of bitcoin. However, critics say the process consumes high levels of electricity.

CBDCs need to be designed in such a way that they avoid risks of harm to the “international monetary and financial system, including the monetary sovereignty and financial stability of other countries,” officials said.

The 13 principles are meant to support and inform global policy deliberations amid a rise in the use and innovation of digital currencies.

No G-7 authority has as of yet decided to issue a CBDC, and careful consideration of the potential policy implications will continue, the statement said.

In August, Federal Reserve Governor Christopher Waller said he is “highly skeptical” about the need for the U.S. central bank to develop a digital currency.

In remarks delivered to the American Enterprise Institute in Washington, Waller pointed to potential costs and risks such as competition with commercial banks and cybersecurity concerns.
“While CBDCs continue to generate enormous interest in the United States and other countries, I remain skeptical that a Federal Reserve CBDC would solve any major problem confronting the U.S. payment system,” Waller said.
Reuters contributed to this report.
Katabella Roberts
Katabella Roberts
Author
Katabella Roberts is a news writer for The Epoch Times, focusing primarily on the United States, world, and business news.
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