Research-based
policy recommendations
for the G7

Central Bank Digital Currencies: Governance, Interoperability, and Inclusive Growth

Abstract

As economies have become increasingly digitalized, central bank digital currencies (CBDCs) have been at the forefront of the agenda for central banks as a means to enhance payments systems’ efficiency (both domestically and cross-border) and increase financial inclusion, and more broadly to support the effective transmission of monetary policy in the digital age (BIS, 2020; Boar and Wehrli, 2021). While the potential of CBDCs to meet these goals is clear, a secure underlying infrastructure and a credible, globally accepted system is of paramount importance. This would help to mitigate against potential cybersecurity and financial crime risks related to fraud and illicit payments. More broadly, the development of a sound, efficient and interoperable system to enable friction-free use of CBDCs across borders and national systems would help to maintain stability, enhance financial inclusion and support inclusive growth. This policy brief, recognizing the faster pace of digital transformation and innovations in digital finance post-pandemic, calls for the G7 to champion and steward widespread preparations for the introduction of a globally interoperable system for CBDCs. This includes bringing together central banks and international financial institutions to understand the cross-border dimensions in the optimal design of CBDCs and supporting infrastructures, in order to ensure that central bank issued money retains relevance as a vehicle for monetary policy transmission and global financial stability. A coordinated approach to the interoperability of CBDCs would also help to alleviate the potential misuse of CBDC systems for financial crime purposes, such as evading sanctions on financial transactions. The policy brief also proposes policy options for maximizing the potential of CBDCs for inclusive growth, notably in relation to lifting prevailing levels of digital education, financial literacy, and digital infrastructure as part of distribution.