Four Central Bank Experts Shared Their Views On CBDC & Crypto Regulation
Four central bank experts shared their approach on central bank digital currencies (CBDCs) during a Central Reserve Bank of Peru (BCRP) and Bank for International Settlements (BIS) conference.
During a discussion about challenges for monetary policy and financial stability, regulations were mentioned, with the panelists sharing their take on CBDCs and crypto regulations.
It appears that several countries are paying attention to crypto and thinking hard about how to regulate it – currently a work in progress.
Julio Velarde, Perú’s Central Bank President
Velarde is mainly focused on improving the payment system by making it more efficient and less costly, while interconnecting players. According to Reuters report Peru was working with three other central banks to research CBDCs.
“A part of that at the end might be at the end a central bank digital currency, but it’s not the main issue. Our concern, why we’re thinking of a central bank digital currency, is because we believe that ‘stable currencies’ might increase in importance.”
According to Velarde, El Salvador’s approach making bitcoin legal tender “has a lot of risk” for fiscal accounts, creditors and people saving in that currency.
Agustín Carstens, BIS General Manager
Carstens, who also was the ex-governor of the Bank of Mexico from 2010-2017, said that society has increased its appetite for digital financial transactions.
“In many countries, society as a whole doesn’t have the option to hold central bank money in the digital form, and my sense is that it’s very likely that the appetite to hold central bank digital currency will be there. And it is there because there is something that central bank money brings that other forms of private money don’t bring — and that is the backing of, precisely, a central bank. That behind this is the trust that the national currency [has].”
Carstens also pointed out that it is possible to improve the payment system without the need for a CBDC or digital currency, giving as example the national payment systems like Brazil’s Pix or Mexico’s CoDi.
Mexico is planning to issue its own CBDC by 2024.
Talking about stablecoins, Carstens said that they “go more into the field of speculative assets.” Talking about DeFi, he said:
“DeFi is an avenue to go around the regulation, and therefore I think it has a limited reach.”
John Williams, president and CEO of the Federal Reserve Bank of New York
According to Williams the U.S. needs a strong regulatory framework around cryptocurrencies. He explained:
“We need a really effective regulatory structure around cryptocurrencies in general, and stablecoin. I do think there’s going to be an enormous amount of innovation going on in the financial system.”
Earlier this month the US president, Biden recently issued an executive order instructing the U.S. Treasury Department and five other agencies to address risks and possible benefits of digital assets. Among other measures, the order calls for exploring a CBDC.
“I do think though that the regulatory issues are really important for the US, you can see so many issues around financial stability, investor and consumer protection, money laundering and things if cryptocurrencies aren’t appropriately regulated. But if they are, I do think there’s opportunities for stablecoins or things like that to be kind of addressed, or versions of those technologies address, some of the issues that Julio and Agustín mentioned, especially in and around cross border payments.”
Roberto Campos Neto, President Of Brazil’s Central Bank
Campos Neto believes that the key challenge to regulation is ensuring that laws continue to be competitive as innovation exponentially evolves.
“The real problem is, is it going to be competitive three, four years, five years ahead? So, I think the real challenge is to be able to do regulation looking forward at something that will grow so exponentially.”
Brazil is working on a CBDC that could go live in 2024, with the pilot likely to start this year. In November 2020, the country also launched an instant payment system called Pix, which quickly gained popularity.
