Legal Aspects of Central Bank Digital Currency: Central Bank and Monetary Law Considerations

IMF Working Papers, November 20, 2020

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Legal Aspects of Central Bank Digital Currency: Central Bank and Monetary Law Considerations

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Bibliographic details

• Authors: Wouter Bossu, Masaru Itatani, Arthur D. P. Rossi
• Published: November 20, 2020
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781513561622.001

Overview

• Authors: Wouter Bossu, Masaru Itatani, Arthur D. P. Rossi
• Publication date: November 20, 2020
• Type: IMF Working Papers, Working Paper No. 2020/254, Issue: 254
• Pages: 51
• Volume: 2020
• DOI: https://doi.org/10.5089/9781513561622.001
• Stock No: WPIEA2020254
• ISBN: 9781513561622
• ISSN: 1018-5941

Main findings

• The paper analyzes the legal foundations of central bank digital currency (CBDC) under central bank and monetary law.
• Absent strong legal foundations, the issuance of CBDC poses legal, financial and reputational risks for central banks.
• The appropriate design of the legal framework will up to a degree depend on the design features of the CBDC, but some general conclusions can be made:
  • Most central bank laws do not currently authorize the issuance of CBDC to the general public.
  • From a monetary law perspective, it is not evident that “currency” status can be attributed to CBDC.
• The central bank law issue can be solved through rather straithforward law reform.
• The monetary law issue poses fundmental legal policy challenges.

Legal challenges identified

• Authorization gap:
  • Most central bank laws do not currently authorize issuance of CBDC to the general public.
• Currency status uncertainty:
  • It is not evident that “currency” status can be attributed to CBDC under existing monetary law frameworks.
• Risks from weak legal foundations:
  • Legal risks
  • Financial risks
  • Reputational risks

Policy implications and recommendations

• Law reform:
  • Reforming central bank laws can address the authorization gap for public issuance of CBDC; such reform is characterized in the paper as "rather straithforward."
• Monetary law policy:
  • Addressing the attribution of “currency” status to CBDC requires confronting fundamental legal policy challenges; solutions are less straightforward than central bank law reform.
• Design-dependent legal framework:
  • The legal framework should be designed in line with the chosen CBDC design features, recognizing that design choices affect legal treatment and associated risks.

Subject areas and keywords

• Subject: Central Bank digital currencies, Central bank legislation, Central banks, Currencies, Financial markets, Legal support in revenue administration, Money, Payment systems, Revenue administration, Technology
• Keywords: Blockchain, book money, CBDC, Central Bank digital currencies, Central Bank Digital Currency, central bank law, Central bank legislation, Crypto assets, Cryptocurrency, Currencies, digital currency, law reform, Legal support in revenue administration, monetary unit, Payment systems, token-based CBDC, WP

Source: IMF Working Paper "Legal Aspects of Central Bank Digital Currency: Central Bank and Monetary Law Considerations" by Wouter Bossu, Masaru Itatani, and Arthur D. P. Rossi, November 20, 2020.

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