G7 Finance Ministers Agree Principles For Central Bank Digital Currencies

An in-person meeting of the G7 finance ministers and central bank governors has taken place on Wednesday, where agreed cryptocurrency principles and corporate tax reform were on the agenda.

The G7 finance officials endorsed 13 public policy principles for central bank digital currencies, and stressed they should be grounded in transparency, the rule of law and sound economic governance, the US Treasury Department announced.

It comes after Tesla’s CEO and cryptocurrency champion Elon Musk said last month that the US government should steer clear of trying to regulate the crypto market.

Crypto principles endorsed

The G7 finance officials met in person in Washington DC, during the annual meetings of the International Monetary Fund and World Bank, under the leadership of British Chancellor (finance minister) Rishi Sunak.

The G7 finance ministers “applauded the historic deal between 136-nations that will reshape the international tax system and equip the global economy to meet the needs of the 21st century.”

The G7 ministers also endorsed the G7 Public Policy Principles for Retail Central Bank Digital Currencies.

“Innovation in digital money and payments has the potential to bring significant benefits but also raises considerable public policy and regulatory issues,” said the G7 finance ministers and central bankers in a joint statement.

“Strong international coordination and cooperation on these issues helps to ensure that public and private sector innovation will deliver domestic and cross-border benefits while being safe for users and the wider financial system.”

In their joint statement, the G7 officials also said that central bank money in the form of Central Bank Digital Currencies, or CBDCs, would complement cash and could act as a liquid, safe settlement asset and an anchor for the payments system.

However they noted “no G7 authority has yet taken the sovereign decision to issue a CBDC and careful consideration of the potential policy implications will continue.”

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Transparency, rule of law

They said the principles were meant to support policy and design deliberations within and beyond the G7, complementing recently published work by a group of central banks and the Bank for International Settlements.

“We reaffirm that any CBDC should be grounded in our long-standing public commitments to transparency, the rule of law and sound economic governance,” the statement said. “Any CBDC must support, and ‘do no harm’ to, the ability of central banks to fulfill their mandates for monetary and financial stability.”

The G7 officials stressed the importance of rigorous privacy standards, cybersecurity, the need to protect users’ data and transparency on how information will be secured and used.

They said such currencies must be energy efficient and operate in an open, transparent and competitive environment, while underscoring the importance of interoperability on a cross-border basis and the need to minimize any harmful spillovers to the international monetary and financial system.

They reiterated that no global stablecoin project should begin operation until it addresses legal, regulatory and oversight requirements, echoing a similar statement made by the larger Group of 20 finance officials earlier.

Stablecoins are a type of digital coin that are linked to traditional currencies.

Institutional reluctance

Despite the fine sounding rhetoric, there remains entrenched worry and concern about the growing use of cryptocurrencies among regulators and central banks.

The governor of the Bank of England (BoE) Andrew Bailey, in May warned cryptocurrencies “have no intrinsic value” and people should only buy cryptocurrencies if they are prepared to lose all their money.

He then went one step further and said cryptocurrencies and similar assets were a danger to the public.

That said, earlier in the year the Bank of England and HM Treasury announced that the Chancellor, Rishi Sunak had asked them to look at the case for a new “Britcoin”, or central bank-backed digital currency.