New and developing research from the International Monetary Fund suggests that central banks around the world need new legal definitions for tokenized currencies.
On Friday, the International Monetary Fund published a new working paper on central bank digital currencies, or CBDCs, and their legal ramifications.
In the paper, researchers including IMF legal counsel Wouter Bossu and Catalina Margulis argue that current frameworks are inadequate for issuing public-facing CBDCs. The researchers are particularly concerned about how existing definitions of money can apply to such a new technology, but, optimistically, suggest the problem is simple enough to fix:
“The absence of an explicit and robust legal basis for the issuance of token-and/or account-based CBDC can be relatively easily remedied through targeted central bank law reform.”
The new paper also brings into question whether the monopoly that most central banks enjoy on the issuance of fiat currencies — which is reasonable enough, except that they seem to be suggesting rendering private fiat-pegged stablecoins illegal:
“The issuance of private digital tokens that resemble CBDC could give rise to very much the same problems, including a severely disrupted monetary system, caused in the 19th century by the issuance of banknotes by private banks that subsequently could not honor their obligations to convert those notes in real currency.”