G7 Plans To Help Developing Economies Explore CBDCs

Japan is set to chair several meetings for Group of Seven (G7) financial leaders this year, and crypto policy will feature among their topics of discussion, as will central bank digital currencies (CBDCs).

The G7 — which consists of Britain, Canada, France, Germany, Italy, the US and Japan — will come together in Japan next month for wide-ranging conversations on the global economy and financial markets, according to a schedule of the Hiroshima Summit.

G7 ministers will explore the most effective ways to help developing economies develop CBDCs, Reuters reported, while ensuring compliance with international standards.

“We have to address risks from the development of CBDC by ensuring factors such as appropriate transparency and sound governance,” Japan’s deputy minister of finance Masato Kanda reportedly said at a seminar in Washington.

CBDCs are a different concept to cryptocurrencies like bitcoin (BTC) and ether (ETH). They’re government-issued tokens pegged to fiat and don’t necessarily have to run on a blockchain or distributed ledger system.

The G7 will also make it a priority to talk through a public policy principle for retail CBDCs, which would be intended for use by the general public (wholesale CBDCs would instead be developed for institutions).

Talk around digital asset regulation has increasingly become a focus, especially after a string of bankruptcies and crypto company implosions last year.

G20 countries have separately decided to adopt a common framework for digital assets, yet to be devised. The plan would include risk management and ways to deal with potential shocks and collapses. 

Kanda acknowledged that crypto’s rise hasn’t come without threats to investor security, and noted not all economies are on the same page.

“For crypto assets, there are a bit of diverging views among countries. But consensus is definitely that we need more regulation, particularly after the FTX shock,” he said.

China is already at the forefront in the development of CBDCs, with its digital yuan currently being developed by the central bank. Spending in the digital yuan already appears to have been successful, with transactions reportedly crossing 100 billion yuan ($13.9 billion) in August last year.

Japan’s ruling Liberal Party recently released a white paper that sets out recommendations to boost the crypto industry there, signaling that it’s open to innovative financial technology.

“After crypto winter, Japan may be the first to welcome spring,” the paper said. “As a country that has overcome many hardships in the cryptocurrency industry, we are in a position to persuade the world about the immeasurable potential of Web3.”

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