The development of cryptocurrencies as an alternative to traditional “fiat” currencies together with the continued move away from the use of cash (accelerated during the COVID-19 pandemic) has encouraged nation states to consider the development of their own central bank digital currencies (CBDCs). 

The EU and the UK have been undertaking a considerable amount of thinking and consultation on how to develop robust CBDCs.  According to the European Central Bank, a digital Euro CBDC is unlikely to be issued before 2026. The US has been similarly cautious on developing a USD CBDC. Conversely, China has been leading the race with its “digital yuan”, that started public testing in April 2021. It is against this backdrop that consideration has been given to developing a series of principles which can form the foundation for developing CBDCs.

On 13 October 2021, the Group of Seven Nations (G7) published 13 public policy principles for retail CBDCs.

The joint statement by G7 Finance Ministers and Central Bank Governors highlighted that these principles were grounded in transparency, the rule of law and sound economic governance. The joint statement acknowledged that while digital money and payments could provide significant benefits, they also had the capacity to raise considerable public policy and regulatory issues.

The aim of these principles is to ensure international cooperation and coordination on these issues to capitalise on these potential benefits while minimising risk for the users and the wider financial system.

Principle 1: Any CBDC should be designed such that it supports the fulfilment of public policy objectives, does not impede the central bank’s ability to fulfil its mandate and ‘does no harm’ to monetary and financial stability

CBDCs have the potential to assist central banks in harnessing new technologies to enhance financial stability and continue serving the public. However, central banks would need to manage the impact of any additional innovation opportunities CBDCs may provide to banks and financial intermediaries during any transition phase for CBDCs. This would need to be addressed through appropriate design such as built-in safeguards which would moderate risks from rapid adoption with policy objectives and benefits around meaningful use of CBDCs.

The aim of these principles is to ensure international cooperation and coordination on these issues to capitalise on these potential benefits while minimising risk for the users and the wider financial system.

Principle 2: G7 values for the International Monetary and Financial System should guide the design and operation of any CBDC, namely observance of the rule of law, sound economic governance and appropriate transparency.

The G7 recognises that entities operating within the CBDC system could come into contact with personal data and it would be crucial to set up appropriate transparency and accountability frameworks for public and private players. Such national frameworks are vital to ensuring the financial system’s confidence in CBDCs and to ensure its resilience and security.

Principle 3: Rigorous standards of privacy, accountability for the protection of users’ data, and transparency on how information will be secured and used is essential for any CBDC to command trust and confidence. The rule of law in each jurisdiction establishes and underpins such considerations.

Privacy of CBDC users must be protected and the processing of their data should be subject to the privacy and data protection laws of each jurisdiction which may vary but would generally be governed by the principles of legality, purpose limitation, data minimisation, transparency and accountability, and user consent. The use of personal data should be highly transparent and any access beyond the minimum required should necessitate entities to set out  the additional data requirements in a robust consent framework that are needed to provide a viable and functional service.

Principle 4: To achieve trusted, durable, and adaptable digital payments; any CBDC ecosystem must be secure and resilient to cyber, fraud and other operational risks.

Unlike physical bank notes, the G7 recognises that CBDCs are reliant on the infrastructure underpinning them and emphasise the importance of capacity planning, business continuity, disaster recovery planning, crisis simulation and playbook development to maintain the resilience of the CBDC infrastructure. Private and public players in the CBDC ecosystem may need to work together on their approach to operational resilience and cybersecurity, in line with national and international standards, to secure the resilience of the overall CBDC system.

Principle 5: CBDCs should coexist with existing means of payment and should operate in an open, secure, resilient, transparent and competitive environment that promotes choice and diversity in payment options.

The G7 considers that policies should be put into place to ensure competition and diversity of choice in payment markets to promote innovation. By providing an additional means of payment, CBDCs will enhance competition however it is also vital to ensure two-way interoperability between CBDCs and other payment methods. The G7 also acknowledges the varying roles that can be played by public and private players in the CBDC ecosystem in accordance with their comparative advantages however, in order to protect consumers, it is emphasised that these services must be subject to regulatory oversight and should be carried out in a transparent and competitive manner.

Principle 6: Any CBDC needs to carefully integrate the need for faster, more accessible, safer and cheaper payments with a commitment to mitigate their use in facilitating crime.

It is crucial that CBDCs comply with anti-money laundering, counter-terrorist financing and counter-proliferation of weapons of mass-destruction obligations. Such safeguards should be built into the design of CBDCs and advancements in technology should be harnessed to accurately authenticate and verify transactions.  CBDCs can offer opportunities in the improvement of information-sharing processes and increase the effectiveness of real-time monitoring and ex-post facto investigations of payments and value transfer. The G7 also recognises that both public and private players have a role in this endeavour if illicit finance is to be countered effectively. Private players should be considered obliged entities and held responsible for reducing illicit finance in the CBDC ecosystem.

Principle 7: CBDCs should be designed to avoid risks of harm to the international monetary and financial system, including the monetary sovereignty and financial stability of other countries.

A fine balance must be drawn in allowing access to non-residents to CBDCs in order to facilitate cross-border payments and preventing unfettered access which could lead to currency substitution and loss of monetary sovereignty causing financial instability in either or both nations. The G7 highlights that countries vulnerable to such risks should work in collaboration to create and implement safeguards to minimise any negative impact. Public authorities must consider the implications of overseas access to their CBDCs and ensure ongoing multilateral cooperation for the resilience and stability of all CBDCs.

Principle 8: The energy usage of any CBDC infrastructure should be as efficient as possible to support the international community’s shared commitments to transition to a ‘net zero’ economy.

The design and implementation of CBDCs must account for energy usage from the start. With IT infrastructures currently utilising significant amounts of global energy, CBDCs can set a new standard by being energy-efficient and reliant on carbon-neutral / sustainable sources of energy without sacrificing their functional, performance and resilience goals.

Principle 9: CBDCs should support and be a catalyst for responsible innovation in the digital economy and ensure interoperability with existing and future payments solutions.

Public and private players must have clearly defined roles which will in turn support innovation. End-users, financial institutions, technology and other service providers and merchants should also be consulted in the development of CBDCs to account for a wide range of current and future needs. CBDCs themselves should support innovation by providing faster, cheaper, more inclusive, convenient and efficient payment solutions to reduce fragmentation amongst end-users and reduce concentrations within the payment landscape.

Principle 10: Authorities should consider the role of CBDCs in contributing to financial inclusion. CBDC should not impede, and where possible should enhance, access to payment services for those excluded from or underserved by the existing financial system, while also complementing the important role that will continue to be played by cash.

CBDCs should aim to be financially inclusive and must account for barriers to access to payment services such as cost, geography, connectivity, demographics, lack of or limited verifiable identification and low levels of literacy. The private sector must innovate solutions to limit the impact of these barriers while countries and international organisations must develop policies around financial literacy, digital literacy and access to digital infrastructure to support these efforts.

Principle 11: Any CBDC, where used to support payments between authorities and the public, should do so in a fast, inexpensive, transparent, inclusive and safe manner, both in normal times and in times of crisis.

CBDCs can make payments between authorities and the public more efficient by providing an additional payment infrastructure that could cover previously-unbanked populations and improved identity verification. However, this would require scale adoption of CBDCs for efficiency and require public authorities to use CBDCs in a legally defined manner to protect social values and individual rights.

Principle 12: Jurisdictions considering issuing CBDCs should explore how they might enhance cross-border payments, including through central banks and other organisations working openly and collaboratively to consider the international dimensions of CBDC design.

CBDCs could offer process improvement in cross-border and cross-currency interoperability and reduce the current problems of high costs, low speed, limited access and insufficient transparency associated with cross-border payments. International transactions by individuals and businesses could be made more efficient by providing for appropriate levels of overseas access to CBDCs to non-residents.

Principle 13: Any CBDC deployed for the provision of international development assistance should safeguard key public policies of the issuing and recipient countries, while providing sufficient transparency about the nature of the CBDC’s design features.

The G7 recognises that there are limitations in using CBDCs for international development and the associated risks and opportunities are important considerations as the G7 considers the design of CBDCs as they aim to align them to principles of aid effectiveness and effective development cooperation.


No G7 authority has decided to issue a CBDC yet but the joint statement highlights that the nations are continuing their consideration of the public policy implications of doing so. These principles provide an insight into the higher legal, regulatory and oversight standards CBDCs may be held to in order to minimise potential risks to financial stability. These principles also show that CBDCs are not solely a public sector endeavour but private players, including relevant international organisations, will also have a significant role to play in adhering to these principles as well as G7 central banks.

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