Legal fog over central bank digital currencies "unacceptable", BIS warns

LONDON (Reuters) – Developing national digital currencies are facing a risk due to a lack of legal powers to issue them in most of the world, warned the head of the global central bank umbrella body, the Bank for International Settlements (BIS), on Wednesday.

An IMF paper in 2020 revealed that nearly 80% of central banks cannot issue digital currencies under their current laws or face unclear legal frameworks, despite having regulations on banknotes, coins, and credit balances.

“This needs to be rectified,” stated BIS’ general manager, Agustin Carstens, during a speech. “The public rightfully demands forms of money that meet their needs and expectations.”

Carstens’ warning comes as central banks worldwide are pursuing the development of central bank digital currencies (CBDC) to modernize money and keep up with the features offered by cryptocurrencies.

Eleven countries have already launched CBDCs, and next month, the European Central Bank is expected to receive approval to begin working on a digital euro.

Carstens, whose organization oversees much of the global testing, emphasized that central banks have a mandate to meet public demands and have made significant investments in CBDCs.

“It is simply unacceptable that unclear or outdated legal frameworks could hinder their deployment,” added Carstens, the former governor of Mexico’s central bank. “The work to address these issues needs to begin in earnest. And it needs to proceed at a rapid pace.”

(Reporting by Marc Jones; Editing by Josie Kao)