BIS calls for countries to establish legal frameworks supporting CBDCs, stating that cryptocurrencies and stablecoins are not money.

The General Manager of the Bank for International Settlements (BIS), Agustín Carstens, called for clear and updated legal frameworks for the deployment of Central Bank Digital Currencies (CBDCs) at a conference in Switzerland. When referencing cryptocurrencies and stablecoins, Carstens mentioned that although they have driven change, they lack intrinsic value and therefore are not considered as currencies.

BIS Calls for Advanced Legal Frameworks

According to The Block, Agustín Carstens, General Manager of the Bank for International Settlements (BIS), stated at a meeting in Switzerland:

Outdated legal frameworks in different jurisdictions may hinder the development of Central Bank Digital Currencies (CBDCs). Unclear or outdated legal frameworks may impede their deployment, which is entirely unacceptable.

Carstens emphasized that the current monetary system needs to evolve, and central banks worldwide are actively exploring CBDCs to drive innovation. However, central banks cannot achieve the expected transformation alone.

Carstens cited a 2021 report from the International Monetary Fund (IMF), which stated that nearly 80% of central banks are unable to issue digital currencies under existing laws, or the legal framework is unclear. However, BIS's survey shows that 93% of central banks are actively involved in CBDC development. This indicates that legal frameworks are lagging behind central banks' progress in the CBDC field.

Nevertheless, the legitimacy of CBDCs comes from the central bank's authority to issue them, and this authority must be firmly grounded in law. Without legal support, currencies cannot function.

Carstens urged that legal frameworks across jurisdictions must be able to interoperate with each other. He added:

If we end up with a fragmented system and legal framework where different digital currencies cannot interact, that would be unfortunate.

CBDC Legislation Must Balance User Protection and Financial System Integrity

Carstens also mentioned that legislation for CBDCs must strike a balance between protecting users, maintaining the integrity of the entire financial system, and supervising suspicious transactions that may involve money laundering.

Any legal framework should ensure that CBDCs offer choices to users, allowing CBDCs to coexist with cash and commercial bank funds.

Cryptocurrencies and Stablecoins Are Not Currencies

Carstens noted that the use of cash is declining, and there is increasing demand for new forms of currency. While cryptocurrencies and stablecoins drive change, they lack intrinsic value.

Although they are somewhat popular as speculative investments, these financial instruments are not currencies.

They lack the backing and protection of a central bank as the lender of last resort and are not supervised by regulatory authorities. Even stablecoins cannot guarantee a stable value. They do not meet the public's expectations for currencies.