Officials of the world’s largest advanced economies have recognized the potential benefits of central bank digital currencies (CBDCs). But they cannot quell the voices warning about the dangers to privacy and the threat of government overreach. The officials emerge from their May 13 meeting in Niigata, Japan, with both optimism and concerns about an increasingly critical area of finance, and more meetings coming up soon.
Members of the G7, or “Group of Seven,” forum of developed economies have given CBDCs muted support in their latest communiqué. Summarizing the stances and positions of finance ministers and central bank governors of the member nations.
CBDCs on the Agenda
The G7 is a voluntary association of some of the world’s largest developed economies. The group used to include Russia, but the country lost membership for its annexation of Crimea in 2014. Currently, it includes Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.
The full name of the document where the tentative thumbs-up appears is the G7 Finance Ministers and Central Bank Governors Meeting Communiqué. Such documents outline consensus positions agreed to during or prior to meetings. The communiqués have the status of binding commitments for the participating nations.
The officials openly acknowledge the importance of this emerging area of finance.
“A reliable, stable, and transparent global payment system is a key foundation for our economic and financial activities, and Central Bank Digital Currencies (CBDCs) could have a substantial role to play in this context,” they write. Before going on to emphasize the need for strong principles of transparency, data protection, cybersecurity, and economic governance in any CBDCs that undergo wide adoption.
The officials agree to “continue policy deliberation on digital money to harness the benefits of innovation such as payment efficiency as well as financial inclusion.”
Although, the document does acknowledge downsides. Including potential risks to “stability, resilience, and integrity of the monetary and financial system.”
The upshot here is that CBDCs could have a significant role to play in the global economy. And, the G7 welcomes the International Monetary Fund’s work on its “CBDC Handbook.” A resource that will outline emerging lessons, analytical findings, and policy views.
Further meetings will take place in Japan later this week, between May 19 and May 21.
CBDCs Remain Controversial
To be sure, CBDCs are one area of financial technology that governments around the world have been relatively enthusiastic about. However, their use and implementation are controversial in the crypto community.
While some vocally favor innovation, and praise the benefits CBDCs may bring, others have been blunt about their potential to increase economic surveillance and government control. Although, far from everyone agrees about the alleged risks to privacy.
Officials in both the UK and the EU have said in the past that any CBDC they introduce will not be programmable. Meanwhile, Japan plans to undertake a trial of its own CBDC with major banks later this year.
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