G7 edict includes statement on central bank digital currency
G7 finance ministers, as well as several international organizations, have met in recent days in the UK to discuss “building a strong, sustainable, balanced and inclusive global economic recovery”. Between the goal of creating a 15% global minimum tax targeting big tech companies and creating a “green global financial system” was a statement on digital currencies from the central bank or CBDC.
The investigation and, in some situations, the issuance of digital currencies issued by central banks has gained momentum in recent months. The fact that China has already issued a pilot digital yuan, a program that continues to expand, and the emergence of stablecoins based on fiat currency have accelerated the recognition that central banks need to speed things up regarding the future of money. Most developed countries have internal projects examining the benefits and challenges of CBDCs with particular emphasis on the impact of digital currency on monetary policy.
According to the joint statement, innovation in digital currency and payments has the potential to bring significant benefits, but also to raise public policy and regulatory issues.
To quote the G7:
“The G7 central banks have explored the opportunities, challenges as well as the implications for monetary and financial stability of central bank digital currencies (CBDCs) and we commit to working together, as finance ministries and central banks, within the framework of our respective mandates, on their broader public policy implications. We note that any CBDC, as a form of central bank money, could serve as both a liquid and secure settlement asset and an anchor for the payment system. Our goal is to ensure that CBDCs are founded on long-standing public sector commitments to transparency, the rule of law and sound economic governance. CBDCs must be resilient and energy efficient; support innovation, competition, inclusion and could improve cross-border payments; they should operate within appropriate confidentiality frameworks and minimize spillover effects. We will work on common principles and publish conclusions later in the year.
The G7 continued to assert that no global stablecoin project should begin to operate until it adequately meets relevant legal, regulatory and supervisory requirements through proper design and adhering to applicable standards. . This statement may be in reaction to Facebook’s unsuccessful attempt to create a non-sovereign global currency, once called Libra, and now revived as Diem – a scaled-down digital currency attempting to start as a digital dollar.
The G & states that it is engaged in international cooperation to ensure common standards, including by supporting international standardization bodies in reviewing existing regulatory standards, and stresses the importance of filling identified gaps.
“We support the FSB’s ongoing work in examining the regulatory, supervisory and supervisory challenges related to the implementation of its high-level recommendations for global stable coin agreements. We continue to support the ambitious implementation of the G20 roadmap to improve cross-border payments and welcome the publication of the FSB consultation on targets for addressing the four challenges of cross-border payments.
Noteworthy is a statement in support of the Financial action group (FATF) to end money laundering and illicit activities in the global financial system. The G7 says implementation of standards remains “uneven” and calls on members, as well as “FATF-like regional bodies” to step up the fight against money laundering. Although they don’t mention crypto by name, digital assets are included in the FATF standards – most recently the requirements outlined in the “Travel Rule” which obliges VASPs (virtual asset service providers) to keep records of buyers and sellers in just about all crypto transactions.