In Brief:
- G7 countries sought to give some guidelines in the matter of CBDC.
- On wednesday Finance chiefs of G7 countries will give 13-point rules to regulate CBDC.
- China is currently the only major economy, with a pilot program of its digital yuan under way.
The Group of Seven countries (G7), comprising France, Germany, Italy, Japan, UK, and USA is taking revolutionary steps. After deciding on Global Minimum corporate tax, G7 is looking to set out guidelines for Central Bank Digital Currencies (CBDCs).
As part of a common set of guiding principles for central bank digital currencies, the Group of Seven industrialized nations is calling for transparency and privacy protection.
On Wednesday, finance chiefs of G7 in Washington are expected to endorse the 13-point rules.
Although regulations on currencies are sovereign matter, this common set of principles, and a focus on values like transparency, rule of law, and sound economic governance, will serve as a guide and an indicator of how CBDCs in the G-7 and beyond can be explored.
The fact to note here is, so far, none of the G7 members have decided to implement a CBDC. These guidelines may be a sign that inner financial circles in G7 countries may explore CBDCs in future.
Additionally, the draft outlined strategies to tackle fraud, mitigate risk of evading financial sanctions, and create a resilient system using methods such as crisis simulations and playbook development.
In its report on China’s digital currency, the Center for a New American Security suggested a CBDC system “will likely enable the Chinese Communist Party to strengthen its digital authoritarianism domestically and export its influence and standard-setting abroad.”
China is currently seen as the closest to launching a CBDC of any major economy, with pilot programs regarding the digital yuan underway. Transparency is stressed in response to concerns over the possibility that a CBDC would empower China’s government with the collection of financial transaction data.
These rules and approval would occur at a time when China has taken the lead in launching a CBDC. In response, fears have been raised that the development could allow for more surveillance of its people and economy by an authoritarian state.
The report said, “China’s project represents a significant risk to the long-held standards of financial privacy upheld in free societies.”
The International Monetary Fund reports that 110 countries have “some stage” of considering CBDCs. The Bahamas was the first country to do so. In July, Japan also announced that they started experiments and by the end of 2022 they will have a clear view of the Japanese CBDC.
