Current legal frameworks are inadequate for issuing CBDC to the public. The international body believes in the relevance of the reform of monetary legislation.
The legal department of the International Monetary Fund (IMF) published a document in which it makes a thorough review of the existing financial legal provisions. In that sense, it concludes that a reform of the laws will make The Central Bank Digital Currencies (CBDC) can acquire status as legal tender.
In the report, IMF advisers point out that the issuance of CBDCs is and must be on a stable legal basis that is consistent with central bank law; although, in many cases, this law only authorizes the issuance of coins in the form of paper or plastic.
However, the document proposes a way: “in any case, this lack of legal basis can soften by amendments to the central bank law.” However, it clarifies that even if the CBDC issue has a stable legal basis under central bank law, its status under monetary law will continue to “raise many complex issues.”
Above all, because digital currencies do not represent a new monetary unit and can only be considered as a form of payment expressed in currencies, according to the report.
To identify and address the other complexities, the authors of the document advise government authorities to proceed with caution in case they decide to introduce CBDCs as payment methods in their countries.
They believe that a comprehensive review of the monetary law, the central bank law, and other legal provisions are necessary so that their developments are adjusted to the legal aspects.
What does the IMF say about the attributes of CBDCs?
IMF legal advisers note in their report that the legal treatment of CBDCs is in line with the characteristics of their design. In this sense, they say that digital currencies based on tokens can be considered as a new form of digital money, while those based on accounts are not, but rather represent the digital form of countable money, which are the balances registered in the accounts from creditors.
An example that would illustrate this difference would be a digital currency based on a token such as bitcoin that does not require the identification of who processes the payment, while those based on bank accounts are linked directly to the identity of the user.
The document refers to CBDCs that use a blockchain-based token to represent the digital form of a nation’s fiat currency. The distinction that the authors make is that an account-based system requires verifying the identity of the payer, while a token-based system requires verifying the validity of the asset used to pay.
In any case, under current law, token-based CBDCs do not qualify as currencies in most countries since, until now, this legal category is reserved for fiat money, which adds difficulties for countries that raise the issuance of digital currencies backed by blockchains.
In any case, analysts hope that countries and their central banks will be able to resolve many of these difficulties, which are related to the fact that token-based CBDCs can be available to different layers of the population. They should be able to acquire the same private law privileges as legal tender and to provide criminal protection against electronic.
By. Jenson Nuñez.