Developing national digital currencies are at risk due to a lack of legal powers to issue them in most of the world, the head of the global central bank umbrella body, the Bank for International Settlements, warned on Wednesday.
While countries generally have laws on banknotes, coins and credit balances, an IMF paper in 2020 showed that close to 80% of central banks are either not allowed to issue a digital currency under their existing laws, or the legal framework is unclear.
“This needs to be rectified,” the BIS’ general manager Agustin Carstens said in a speech. “The public rightly demands forms of money that meet their needs and expectations.”
His warning comes as central banks around the world push ahead with central bank digital currency (CBDC) development in a bid to make money more high tech and keep up with the features now offered by cryptocurrencies.
Some 11 countries have already launched them and next month the European Central Bank is expected to receive the green light to start work on a digital euro.
Carstens, whose organisation is overseeing much of the global test work, said central banks have a mandate to meet public demands and have also made significant investments into CBDCs.
“It is simply unacceptable that unclear or outdated legal frameworks could hinder their deployment,” added Carstens, the former governor of the Mexico’s central bank. “The work to address these issues needs to begin in earnest. And it needs to proceed at pace.”