Official standards for regulating and issuing cross-border digital currencies are on the way.

The Group of Twenty (G20) organization of the finance heads from the EU and 19 other countries announced today that it is working alongside the International Monetary Fund (IMF), the World Bank, and the Bank for International Settlements (BIS) to standardize and formalize the use of digital currencies such as stablecoins in banking systems. (Yahoo Finance)

All the involved organizations have agreed to complete regulatory stablecoin frameworks and research and selection of the digital currency designs, technologies, and experiments by the end of 2022.

The digital currencies are referred to as “global stablecoins (GSC).”

Global Stablecoins

A report issued by the G20 Financial Stability Board (FSB) said:

• The FSB has agreed on 10 high-level recommendations that promote coordinated and effective regulation, supervision, and oversight of GSC arrangements to address the financial stability risks posed by GSCs, both at the domestic and international levels.
• They support responsible innovation and provide sufficient flexibility for jurisdictions to implement domestic approaches.
• The recommendations call for regulation, supervision, and oversight that are proportionate to the risks.
• Authorities agree on the need to apply supervisory and oversight capabilities and practices under the “same business, same risk, same rules” principle.
• The performance of some functions of a GSC arrangement may have important impacts across borders.
• The recommendations also stress the value of flexible, efficient, inclusive, and multi-sectoral cross-border cooperation, coordination, and information-sharing arrangements among authorities.

The actions could pave the way for the ultimate evolution of central bank digital currencies (CBDCs).

Central Banks on CBDCs

Earlier, on Friday, central banks released a massive document detailing their expectations of CBDCs.

Titled “Central bank digital currencies: foundational principles and core features,” the report is, according to Coin Telegraph, a joint effort by the Bank of England, the US Federal Reserve, the Bank of Japan, and others.

Among the key expectations outlined in the report are:

• A central bank should not compromise monetary or financial stability by issuing a CBDC
• A CBDC would need to coexist with and complement existing forms of money
• A CBDC should promote innovation and efficiency
• CBDCs should have the attributes of:
  • Convertibility
  • Convenience
  • Security
  • Speed
  • Scalability
  • Legal Soundness, etc

Evidently, the reports on both global stablecoins and CBDCs express concerns surrounding financial stability.

ECB’s CBDC? Lagarde on a digital Euro

Meanwhile, European Central Bank President Christine Lagard said Monday that the ECB was “very seriously” looking at the creation of a digital euro.

According to Business Insider, Lagarde referred to the coronavirus pandemic which boosted e-commerce by almost 20% in terms of volumes and sales between February and June.

As a result, digital payments had increased significantly, she said.

However, she made clear that a digital euro would not substitute cash entirely.

“It is a very good supplement and a very good partial substitute for what was being done physically.”

Related Story:  Mastercard Creates Platform For Simulating a CBDC Ecosystem

Image: G20 Saudi Arabia 2020 First Sherpa Meeting