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Guidelines For Central Bank Digital Currencies

Guidelines For Central Bank Digital Currencies:

G7 finance leaders have laid out guidelines for central bank digital currencies.

  • Any digital currency issued by a central bank must “support and do no harm” to the bank’s ability to fulfil its mandate on monetary and financial stability, and must also meet rigorous standards.
  • Currencies must be issued in a way that do not infringe upon the central banks’ mandates, and meet rigorous standards of privacy, transparency and accountability for protection of user data.
  • Any central bank digital currency (CBDC) should be grounded in long-standing public commitments to transparency, rule of law and sound economic governance.
  • A Central Bank Digital Currency (CBDC), or national digital currency, is simply the digital form of a country’s fiat currency. Instead of printing paper currency or minting coins, the central bank issues electronic tokens. This token value is backed by the full faith and credit of the government.
  • ‘Fit-for-purpose’ money used for social benefits and other targeted payments in a country. For such cases, the central bank can pay intended beneficiaries pre-programmed CBDC, which could be accepted only for a specific purpose.
  • CBDCs could be used for faster cross-border remittance payments. International collaboration among the major economies of the world, including India, could help create the necessary infrastructure and arrangements for CBDC transfer and conversion.
  • Payment instruments could be made available for payment transactions to be made via CBDC. Furthermore, universal access attributes of a CBDC could also include an offline payment functionality.
  • Instant lending to micro, small, and medium enterprises (MSMEs) in India can be possible with the help of CBDC.

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