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Denis Beau, the First Deputy Governor of the Banque de France ( French Central Bank ), identified two valid paths for CBDC development. Firstly, creation of common standards between wholesale CBDCs and existing systems and ensuring their compatibility. Secondly involves the creation of regional or global CBDC platforms supported by the International Monetary Fund (IMF) and the International Bank for Bills (BIS). Standardization of wholesale CBDCs allows them to be directly exchanged on these platforms and allows payment and delivery transactions.

Beau cited Project Mariana as an example and stated that the project, which explored the capabilities of the automatic market maker (AMM), successfully concluded. Additionally, Beau mentioned that they, in collaboration with the Monetary Authority of Singapore and the Swiss National Bank, successfully completed this project in late September.

In addition to CBDCs, Beau discussed the tokenization of finance. He emphasized the importance of more public sector support for the private sector to realize the full potential of blockchain and to limit the risks arising in this process. According to Beau, tokenized central bank money and tokenized assets are complementary allies, not competitors, in the evolving financial landscape.

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General Manager of BIS Agustín Carstens warned in a speech at the BISIH-FSI conference in Switzerland today that outdated legal frameworks in different jurisdictions could hinder the development of CBDCs.

Carstens said, “It is absolutely unacceptable for uncertain or outdated legal frameworks to hinder their implementation.” Also he concluded his words by saying, “Work to address these issues needs to begin seriously and progress quickly.”

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Call for a More Advanced Legal Framework from BIS

Carstens emphasized that the current monetary system needs to evolve. He also stated that central banks are actively researching CBDCs to encourage innovation. But he said central banks alone cannot achieve the transformation they want.

Along with this, Carstens referred to the 2021 IMF document and said that about 80% of central banks either cannot issue digital money based on existing laws or have uncertain legal frameworks.

In contrast, the published BIS survey revealed that 93% of central banks are actively involved in various aspects of CBDC development. This indicates that legal frameworks lag behind the progress made by central banks in the CBDC field.

Carstens noted that the legitimacy of CBDC comes from the legal authority of the central bank to issue it. He added, “This authority needs to be firmly based on laws.” He highlighted the importance of legal frameworks that support the legitimacy of money by mentioning that money is a social structure.

“Money cannot operate without law,” he added.

Carstens called for legal frameworks in the jurisdiction to be able to work together with other jurisdictions. “If we end up with a fragmented system and legal framework where different digital currencies do not work together, it would be an unfortunate situation,” he added.

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