According to recent media reports, the Group of Seven, or G7 is brainstorming and strategizing its actions to help the developing nations introduce their central bank digital currencies (CBDCs).
The Group of Seven (G7) is a grouping of seven major industrialized democracies and advanced economies of the world, including Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States, as well as the European Union. This year, the 49th G7 summit is scheduled to take place in May 2023 and is planned to take place in Hiroshima, Japan.
On Tuesday, Masato Kanda, Japan’s vice minister of finance for international affairs, said that G7 advanced economies will consider what best they can do to help developing countries introduce their CBDCs complying with appropriate international standards.
He added that the move is going to be among the key themes of G7 discussions this year under the presidency of Japan. It is going to be a part of efforts to address challenges the global community face from fast-moving digital technology. Quoting him:
As a priority of this year, the G7 will consider how best to help developing countries introduce CBDC consistent with appropriate standards, including the G7 public policy principle for retail CBDC.
Kanda said the rapid innovation of digital technology provides various benefits but also fresh challenges such as cyber-security, the spread of misinformation, social and political divides, and the risk of destabilizing financial markets. He added:
We have to address risks from the development of CBDC by ensuring factors such as appropriate transparency and sound governance.
The Japanese official also addressed the topic of crypto regulation in his speech and said that the collapse of crypto exchange FTX last year “was a serious wake-up call” for policymakers to create regulation across borders. Speaking of the regulation he said that:
For crypto assets, there is a bit of diverging views among countries. But the consensus is definitely that we need more regulation, particularly after the FTX shock.
CBDCs have become an increasing topic of interest for countries and institutions across the globe. The CBDCs can play an important role in revolutionizing the financial system and countries have been enthusiastically participating in pilots and trials of their CBDCs for the advantages it has to offer, however, some have also highlighted concerns like privacy, etc.
Among the G7 members, Japan has been working on its CBDC model and has also collaborated with the top Japanese banks to ensure a smooth process. On the other hand, the UK is working on a consultation paper revealing its plan for CBDC. Other members including the EU and the US are also proceeding with their plans for CBDC.
Outside the G7, China is said to be leading the CBDC race as the state promotes free giveaways and payment platforms have come in support of integrating CBDC to boost adoption. However, CBDCs are not the same everywhere as Nigeria’s CBDC project is anticipated to be among the most unpopular ones.
In particular, several developing nations are also working on their CBDC models. For example- India has already entered the phase of the CBDC pilot and is now wanting to prioritize the challenges of creating an offline CBDC. Similarly, other developing nations like Pakistan, Brazil, and Zimbabwe are at different phases of their respective CBDC model.
The fame of CBDCs also received noteworthy attention from international entities like the Bank of International Settlements (BIS) and SWIFT. Both agencies are developing platforms to facilitate users’ experience with CBDCs.