// ECONOMIC AND SOCIAL POLICY: MACROECONOMIC AND FINANCIAL POLICY
Digital finance at a crossroads
infrequent, to the detriment of consumer trust and market stability. Due to the vast popularity of crypto assets, central banks in many countries have developed central bank digital currencies. These are digital counterparts to legal money and are managed by the national central bank, with or without the intermediation of the domestic banking system. CBDCs are not cryptocurrencies and are aimed at enhancing financial inclusion, reducing costs, and limiting money laundering and other illicit uses of digital money in the domestic monetary market. Unlike legal money, CBDCs cannot operate outside the domestic market, because there is a lack of interoperability between systems. Although most G7 central banks are conservative and are still at the pilot stage of their CBDC projects, the European Central Bank has reached the final phase of its digital euro project and Europeans will have access to it in the safest possible way by 2026. Similarly, China launched the project for the e-Yuan in 2019, and will introduce a CBDC soon; however, the privacy of e-Yuan trading is not a priority of the People’s Bank of China. The creation of digital currency by the countries in whose currency most foreign reserves are denominated will definitely change the landscape of the monetary system. A COORDINATED APPROACH TO RISK FOR IMPROVED FINANCIAL STABILITY The risks of CBDCs in the current global monetary system are mainly related to the lack of effective regulation with regard to consumer protection, privacy of data and anti-money laundering, as well as the lack of interoperability – the possibility of cross-border trade in digital money – and the disintermediation of the
Mitigating the risks of digital currency expansion through comprehensive regulation, improved interoperability and responsible innovation is the key to greater levels of financial inclusion and stability
C urrent economic conditions are vulnerable to a range of risks, economic policy uncertainties at the global level are growing due to worsening macroeconomic conditions for some G7 members, while rising geopolitical uncertainties further amplify the downside risks at the global level (see figure). One source of concern for global economic policy is the uncontrolled growth and spread of digital finance that has been left uncoordinated and unsupervised. Although technological improvements can benefit the global economy, uncontrolled digital risks such as cyber threats can negatively affect stability, while reducing these risks can smooth economic uncertainty. The cyber resilience of financial systems can be strengthened by implementing coordinated regulatory and supervisory strategies. PATHWAYS TO DIGITAL CURRENCY EXPANSION In the digital financial system, cryptocurrencies are among the most popular traded assets, but they are entirely deregulated and unsupervised. The benefits of cryptocurrencies are mainly associated with financial inclusion, reduced transaction costs and enhanced payment efficiency; costs depend on the competition they can enhance and the illicit use of digital money. Fraud and market manipulation are not
Chiara Oldani, lecturer, monetary economics, Università degli Studi della Tuscia
42 // G7 CANADA: THE KANANASKIS SUMMIT 2025
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