G7 officials target CBDCs issuance by 2027

By Raffaele Redi

CBDC would complement cash and could act as a liquid, safe settlement asset

G7 UK 2021 summit closing press conference                                 
G7 officials endorsed targets for CBDCs - Photo: Shutterstock
                                

G7 finance ministers and central bank governors announced a G20 roadmap to enhance cross-border payments via Central Bank Digital Currencies (CBDCs), setting global targets for addressing the challenges of cost, speed, transparency and access by 2027.

"Innovation in digital money and payments has the potential to bring significant benefits but also raises considerable public policy and regulatory issues," Group of Seven finance ministers and central bankers said in a joint statement.

"Strong international coordination and cooperation on these issues helps to ensure that public and private sector innovation will deliver domestic and cross-border benefits while being safe for users and the wider financial system."

CBDCs, if issued, should be a substitute for cash, said G7 finance ministers.

“If issued, a CBDC would complement cash and could act as a liquid, safe settlement asset and as an anchor for the payments system,” they stated.

G7 finance ministers set a target of the end of 2027, with the exception of the remittance cost target. The United Nations Sustainable Development Goal (UN SDG) had already set a date of 2030. This was endorsed by the G20.

By October 2022, the Financial Stability Board (FSB) is expected to provide a report to the G20 and the public with further details of the implementation approach for progress monitoring.

G7 targets for CBDCs

The G7 finance authorities, who met in Tokyo, welcomed the quantitative global targets recently set for addressing the challenges of cost, speed, transparency and access by 2027.

G7 expects the global average cost of retail CBDCs payment to be no more than 1%, with no corridors with costs higher than 3% by end-2027. No costs target has been set so far for wholesale CBDCs.

Global average cost of sending $200 remittance is expected to be no more than 3% by 2030, with no corridors with costs higher than 5%.

Speed targets for retail CBDCs as well as for wholesale and remittances, expect 75% of cross-border retail payments to provide availability of funds for the recipient within one hour from the time the payment is initiated.

The remainder of the market needs to be within one business day of payment initiation by the end of 2027.

All financial institutions, including all end-users and individuals and providers operating in the payment system, plus more than 90% of financial sector included remittance service and businesses should have at least one CBDC option.  They should have at least one cross-border payment infrastructure by the end of 2027.

Stablecoins

The finance institutions also proposed a review on global stablecoins. They set out definitions of prudential, investor protection, and other requirements for issuers, custodians, and providers of other global stablecoin functions.

For example wallet providers, redemption rights, cross-border, cross-sectoral cooperation and coordination. This also includes mutual recognition and deference.

The review, which will be completed in July 2023, “will identify how any gaps could be addressed by existing frameworks and will lead to the update of the FSB’s recommendations if needed,” said the FSB.

Further reading:  Fed ex-CEOThe e-dollar will be a substitute for cash”

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