Legal Status Needed for CBDCs

Central Bank Digital Currencies (CBDCs) are much talked about. The IMF has published a detailed paper – ‘Legal Aspects of Central Bank Digital Currency: Central Bank and Monetary Law Considerations’ – which explains the legal position of CBDCs and has investigated the position of 171 IMF members to see which are currently able to issue a CBDC. The paper will help central banks think through this element of their CBDC preparations.

The paper starts by asking three questions: 

1. Do central banks have the authority to issue digital currency?

2. Can CBDC be a real ‘currency’?

3. Should digital currency be legal tender?

First of all, every country is different and any statement is a generalisation until you look at your own Central Bank Law (what establishes the central bank, provides its decision making body, lays its foundations for autonomy and gives it its mandate – functions and powers) and Monetary Law (legislative and regulatory framework providing the legal foundations for the use of monetary value in society, the economy and the legal system).