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CBDCs May Need Global Regulation, EU Commissioner Says
Paolo Gentiloni says a series of international agreements may be needed to stop state-backed digital currencies from infringing on countries' sovereignty.
Updated Nov 7, 2022, 2:59 p.m. Published Nov 7, 2022, 1:05 p.m.
Central bank digital currencies (CBDCs) may require a network of international deals to stop state-backed money from infringing on other countries’ sovereignty, European Union Commissioner Paolo Gentiloni said on Monday.
The bloc of 27 nations is considering a digital version of the euro, but needs to resolve issues such as how a digital euro will work for cross-border payments.
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“How do you avoid the risk of infringing the sovereignty of other jurisdictions through a digital currency … while developing a digital currency with global ambition, as the digital euro will be?” said Gentiloni, who is responsible for economic policy at the European Commission, the EU's executive arm. Gentiloni was speaking at a conference on the digital euro organized by the Commission and the European Central Bank.
“This, of course, brings the possibility of specific agreements with other jurisdictions regulating this kind of dimension,” he added.
In October 2021, the Group of Seven major industrialized nations warned that countries that are developing digital versions of their fiat currency need to be wary about treading on other jurisdictions.
EU policymakers have also raised the risk that easy access to a digital euro from overseas could undermine the currency, much like the dollarization of states that adopt U.S. currency without the Federal Reserve’s permission.
The International Monetary Fund has also raised the possibility of an international CBDC platform that could ease cross-border payments but that is now beset by delays and costs.
Gentiloni’s remarks at a conference in Brussels drew an immediate response – including from the Bahamas, one of the few countries that has already rolled out its own CBDC, the sand dollar.
“It is critical that any cross-border initiative, taken in regards to the work on CBDCs, reflects an inclusive approach to the needs that will be expressed by the Bahamas and small countries in this arena,” John Rolle, governor of the Bahamas’ central bank, told the conference.
Read more: Slicing the Elephant: Inside the Design of a Digital Euro
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