On Friday, The International Monetary Fund released a new working paper on Central Bank Digital Currencies (CBDCs) and their legal implications.
In the document, researchers like the IMF’s legal adviser have Wouter Bossu and Catalina Margulis argue that the current framework for making a CDBC public is inadequate. Researchers are particularly concerned about how existing definitions of money can be applied to such new technologies, but hopefully suggest the problem is simple enough to fix:
“The lack of an explicit and solid legal basis for issuing CDBCs on a token and / or bond basis can be remedied relatively easily through specific reform of central bank legislation.”
The new document also challenges most central banks’ monopoly on issuing fiat currencies, which is perfectly reasonable, except that they suggest it Private stablecoins in conjunction with fiat currencies are illegal:
“The issuance of private digital tokens similar to CBDCs could lead to very similar problems, including a severely disrupted monetary system caused in the 19th century by the issuance of banknotes by private banks that later failed to meet their obligations in real bills To convert currency. “
FinallyThe document suggests that changing monetary law will be more difficult than reforming central bank law. The fundamental questions of whether a token can be considered legal tender and how to ensure that it is accepted in a population with variable access to technology remain unanswered.
All of the central banks behind the five major world currencies, the US dollar, the euro, the Chinese yuan, the Japanese yen and the British pound are considering issuing a CBDC. A Bank of England legislature recently spoke of them as part of a “new monetary order”.
From the largest economies in the world China seems closer to issuing a CBDC. Many are suggesting this because the Chinese government is ready to use a digital yuan as a monitoring tool, meaning privacy issues at the cash and government bond level are irrelevant. The People’s Bank of China recently released a bill banning private stablecoins tied to the yuan.