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CBDC’s May Require Global Regulation, According to an EU Commissioner

Author: Sohrab Khawas

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    The Central Bank Digital currencies are digital tokens that are issued by a central bank and resemble cryptocurrencies. They are linked to the value of the fiat currency used in that nation.

    CBDCs are being developed by numerous nations, and some have even put them into practice. Understanding digital currencies and what they signify for society is crucial because so many nations are looking at how to make the transition.

    According to European Union Commissioner Paolo Gentiloni, central bank digital currencies (CBDCs) may need a network of international agreements to prevent state-backed money from violating the sovereignty of other nations.

    The EU is now debating the idea of a digital version of the euro, but there are still many technical questions to be resolved, such as how cross-border payments will be handled.

    “How do you avoid the risk of infringing the sovereignty of other jurisdictions through a digital currency… while developing a digital currency with global ambition, as the digital euro will be?” stated Gentiloni, who oversees economics at the European Commission, the body in charge of governing the EU. ECB and Commission-organized conference on the digital euro was where Gentiloni was presenting.

    He continued, “This, of course, brings the possibility of specific agreements with other jurisdictions regulating this kind of dimension.”

    A CBDC could be a crucial tool for central banks to maintain a secure method of payment in line with the widespread digitalization of people’s daily lives. The provision of the public good of a common unit of account and secure store of value, as well as the maintenance of monetary and financial stability, are all dependent on public confidence in central banks. A central bank should move gradually, publicly, and cooperatively in order to preserve that trust and determine whether a CBDC provides value to a state.

    The central banks in this group will continue to actively and cooperatively work on CBDC, further investigating the real-world applications of the fundamental features. Each of the participating central banks will keep up their outreach efforts to domestic stakeholders in an effort to promote an honest and informed discourse.

    The Group of Seven major industrialized countries issued a warning in October 2021, cautioning anybody creating digital fiat currency not to step on the toes of other governments.

    The possibility of the currency being undermined by too-easy access from abroad has also been brought up by EU policymakers. This is similar to the dollarization of governments that accept U.S. money without the federal reserve approval.

    The notion of a global CBDC platform, which might reduce the costs and delays now associated with cross-border payments, has also been brought up by the International Monetary Fund.

    Gentiloni’s comments at a conference in Brussels sparked an immediate reaction, particularly from The Bahamas, one of the few countries that have actually launched its own CBDC, known as the Sand Dollar.

    John Rolle, the governor of the Bahamas’ central bank, told the conference that it was crucial for any cross-border initiative regarding the work on CBDCs to represent an inclusive approach to the demands that would be voiced by the Bahamas and other small countries in this field.

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