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This week, the top seven advanced economies held discussions on the matter and concluded that CBDCs should not "do no harm" and that they should meet the required standards.
The meeting by finance leaders from the G7 economies was held in Washington on October 13 to discuss how CBDCs can be best developed and aid in the digital transformation of economies. During the meeting, 13 public policy guidelines on the matter were issued on the implementation of CBDCs.
The G7 economies comprise Canada, Germany, Italy, France, the UK, the US, and Japan. The seven countries have stated that CBDC implementation should not harm the central bank's capability to offer financial stability.
A joint statement issued by the seven economies stated that "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 safer for users and the wider financial system."
Another recommendation of these leading economies is that CBDCs should complement cash transactions; hence, they need to offer liquidity and be a secure way to settle transactions. Besides, these digital currencies also need to be developed and used in an energy-efficient manner.
Since digital currencies should be used to complement fiat currencies, the G7 summit recommended that they come with full interoperability to facilitate cross-border transactions.
The G7 economies also noted that they each had the responsibility to maintain minimum "harmful spillovers to the international monetary and financial system." Thus, CBDCs should not affect the stability of the existing monetary systems.
The statement also stated that the issuance of CBDCs should also adhere to public policy. The process needs to be structured around the existing public commitments to bring transparency, the rule of law, and offer solid economic governance.
Despite the G7 economies engaging in these discussions, none of these economies is yet to issue a CBDC. However, the UK is actively involved in researching the technology behind these currencies and the impact of CBDCs on the economy.
The G7 summit also agreed to a previous statement by the G20 on the adherence of CBDCs to the existing regulations. The summit noted that no global economy should develop its own digital currency until it addresses the legal, regulatory, and oversight concerns.
The concerns in the question stem from Facebook's Diem project. The social media company had made plans to develop a stablecoin, which has since raised concerns with global financial leaders and central banks.
The US is one of the leading economies that is taking it slow in CBDC development. The US Federal Reserve remains skeptical of whether the digital dollar is viable and whether it will have any economic benefits. However, some leading economies such as China have already made great strides in CBDC development, which has raised worry that the US could be left behind if plans for the digital dollar do not start soon.
China has already entered the public testing phase with its digital yuan. The country's recent crackdown on cryptocurrencies has also raised speculations that it could be paving the way for China to promote its own digital currency. Besides developed economies, some smaller economies have also started CBDC development.