As central banks worldwide study launching their digital currencies, lawyers from the International Monetary Fund (IMF) have launched a study on this. In the document, they say that the issuance of central bank digital currencies (CBDCs) should take place on “a robust and ideally explicit legal basis” within the law of Central Banks. Otherwise, these currencies can expose Central Banks to legal and political issues.
This is because central banks’ digital currencies generate “important issues regarding the law of a central bank and the monetary law”. Among the researchers responsible for the study are Wouter Bossu and Catalina Margulis, who are part of the Financial and Fiscal Law Unit of the Fund’s Legal Department.
Major central banks already discuss digital currencies
Today, large central banks, such as those in China, the United States, and England, discuss or already test a digital currency of their own. In Europe, the issue is on the radar of the European Central Bank. Even the Brazilian Central Bank studies a digital version of the real. But the study finds that “few central bank laws today offer a strong enough legal basis”.
The document analyzes two types of CBDC: token and account types. And it says that changes in central bank laws can solve the issues for both one and the other. However, even if they have a legal basis within banks, these digital currencies generate “complex issues” regarding monetary legislation.
The text highlights that “no form of CBDC would constitute a ‘new currency’. Instead, CBDC would be a form of a means of payment expressed in the official currency”.
In some countries, adaptation will be easier
The IMF experts conclude that “countries should carefully analyze CDBC’s legal bases” if they decide to adopt it. And it affirms that while in some places there will be a much easier option to expand interpretations of current rules, it may be more complex in others.
Therefore, in these, a major revision of monetary and central bank laws would be necessary “to ensure that the legal aspects of the desired public policy choices are well understood and codified in the law”.
Ideally, for the IMF team, this move would include revision of other legal topics, such as tax laws, for example.