WASHINGTON (Kyodo) – The Group of Seven industrialized countries will call for transparency and privacy protection as part of a common set of guiding principles created for central bank digital currencies, a draft bill said on Monday. document.
The 13-point rules are expected to be approved at a CFOs meeting in Washington on Wednesday, as China takes the lead in the global race to launch a central bank digital currency, or CBDC, as development could allow reinforced surveillance of its economy and its population.
While noting that the issuance of such currencies is a “sovereign matter,” the document obtained by Kyodo News stated that “by setting out a common set of principles and stressing the fundamental importance of shared values ââsuch as transparency, rule of law and sound economy governance, these principles can guide and inform the exploration of retail CBDCs in the G-7 and beyond. ”
None of the G-7 members – Britain, Canada, France, Germany, Italy, Japan and the United States, as well as the European Union – have yet decided to implement a CBDC.
Meanwhile, China is seen by far as the closest of any major economy to launching a CBDC, with pilot programs to develop the digital yuan already underway.
According to the draft document, G-7 members will recognize that the rapid increase in the use of digital payments is transforming the way people and businesses transact, and trends have been “further accelerated” by the pandemic. coronavirus, which has increased the need for contactless transaction functionality.
Among the issues considered âessentialâ for any CBDC, the document cites appropriate national regulatory and supervisory frameworks for the new payment system as well as ârigorousâ standards of confidentiality and accountability for protecting user data and transparency about how information will be secured. and used.
The document also highlighted concerns about heavy use of any CBDCs by residents of a foreign country, which could result in currency substitution and loss of monetary sovereignty in the issuing country and in the foreign country.
“Where access to the CBDC from a jurisdiction abroad could make other countries vulnerable to currency substitution or other fallout, working collaboratively to design and implement safeguards, particularly through through relevant international organizations, can help mitigate negative effects, âhe said.
In the event that a CBDC is used to provide international development assistance, the motivation should be transparent, depending on the project.
Other principles mentioned in the project included a commitment to fight fraud and mitigate the risks of evading financial sanctions as well as creating a resilient system such as stress testing and textbook development.
The emphasis on transparency appears to reflect concerns from critics that the deployment of a CBDC would empower the Chinese government through the collection of big data on private financial transactions.
The Center for a New American Security, a think tank in Washington, said in a report on China’s digital currency that a CBDC system “will likely allow the Chinese Communist Party to strengthen its digital authoritarianism nationwide and export its influence and its normalization abroad. ”
China’s plan “poses a significant risk to the long-standing standards of financial confidentiality upheld in free societies,” warns the report released in January.
According to the International Monetary Fund, 110 countries have reached “some stage” of reviewing CBDCs. The Bahamas is the first country to officially launch a CBDC.
Federal Reserve Chairman Jerome Powell said last month that the US central bank was in the process of assessing whether to issue a CBDC and that it intended to issue a “discussion paper soon. “for input from lawmakers and the public.
The Bank of Japan, meanwhile, launched an experiment earlier this year to verify the basic functions of a CBDC.