Close to 80 percent of the world’s central banks are either not allowed to issue a digital currency under their existing laws, or the legal framework is not clear, according to research conducted by the International Monetary Fund.
To legally qualify as currency, a means of payment must be considered as such by the country’s laws and be denominated in its official monetary unit. Legal tender status is usually only given to means of payment that can be easily received and used by the majority of the population.
“To use digital currencies, digital infrastructure – laptops, smartphones, connectivity – must first be in place… But governments cannot impose on their citizens to have it, so granting legal tender status to a central bank digital instrument might be challenging. Without the legal tender designation, achieving full currency status could be equally challenging.”
An important design feature is whether the digital currency is to be used only at the wholesale level, by financial institutions, or could be accessible to the general public. Allowing private citizens’ accounts, as in retail banking, would be a tectonic shift to how central banks are organized, states the IMF, and would require significant legal changes…
“The creation of central bank digital currencies will also raise legal issues in many other areas, including tax, property, contracts, and insolvency laws; payments systems; privacy and data protection; most fundamentally, preventing money laundering and terrorism financing… If they are to be the next milestone in the evolution of money, central bank digital currencies need robust legal foundations that ensure smooth integration to the financial system, credibility and broad acceptance by countries’ citizens and economic agents.”