G7 Public Policy Principles for Retail Central Bank Digital Currencies
The G7 published a set of public policy principles for retail central bank digital currency (CBDC) alongside a G7 Finance Ministers and Central Bank Governors’ Statement on CBDCs and digital payments. The principles explored in the report are divided into two categories:
- Foundational issues cover monetary and financial stability; legal and governance frameworks; data privacy; competition; operational resilience and cybersecurity; illicit finance; spillovers; and energy and environment.
- Opportunities focus on supporting the digital economy and innovation; financial inclusion; payments to and from the public sector; cross-border functionality; and international development.
The final section discusses the concept of dependencies that may be encountered in designing a retail CBDC ecosystem, for example, interactions between protecting users’ privacy and countering illicit finance. The report seeks to highlight some of the design choices that these dependencies might imply and offers some considerations on how to approach these complex issues. [Read more]
More specifically, CBDC should be committed to transparency, the rule of law and sound economic governance, and not undermine the ability of central banks to fulfil their mandates for monetary and financial stability. The report emphasizes the importance of rigorous standards of privacy, accountability for the protection of users’ data, and transparency on how information will be secured and used, to command trust and confidence by users. Also, any CBDC ecosystem must be secure and resilient to cyber, fraud and other operational risks, must address illicit finance concerns and be energy efficient. CBDCs must operate in an open, transparent and competitive environment that promotes choice, inclusivity and diversity in payment options. It notes the importance of considering interoperability on a cross-border basis given the potential role for CBDCs in enhancing cross-border payments. At the same time, the report recognizes a shared responsibility to minimize harmful spillovers to the international monetary and financial system. [Read more]
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