On Friday, a new working paper was published by the International Monetary Fund (IMF). This working paper was focused on central bank digital currencies (CBDCs) and their expected legal ramifications. The researchers working at IMF have highlighted the need for new legal definitions to be developed for tokenized currencies in these papers. Legal counsel to the IMF, Catalina Margulis and Wouter Bassu were also part of the group of researchers who argused that the existing legal frameworks that have been implemented are not capable of issuing a CBDC that would be used by the public. There were some major concerns about how money has already been defined and how it would be applicable to new technology.
Luckily, the researchers were able to highlight a quick solution to this dilemma; legislation. The researchers focused on the fact that there is no explicit or robust legal basis that can be found for issuing central bank digital currencies (CBDCs). However, it is possible to remedy this rather easily and research showed that it could be done through central bank reforms. There have been some bold moves made by the paper, which include questioning the monopoly that most of the central banks are enjoying when it comes to issuing fiat currency in their respective currencies.
In the past, this was deemed perfectly acceptable, but it has now become an issue because private stablecoins would be rendered unstable because of it. According to the IMF, if private stablecoins are issued, which would be quite similar to CBDCs, then it would result in a monetary system having a lot of disruptions. The 19th century events were cited by the IMF, where bank notes were issued out by private banks and they couldn’t honor their obligation of converting the said notes into real currency.
As such, the whole point of the paper was to ultimately encourage central banks to reform their own laws, as it would be a lot more challenging to re-configure monetary laws. However, it is important to note that these findings do not really provide answers to some of the basic questions. Some of these questions include how to get a central bank digital currency (CBDC) accepted by the public, regardless of their access to technology. In addition, they need to figure out if this token should be considered legal tender by the central bank or not. The five largest fiat currencies out there, which are the US dollar, the Chinese yuan, the Euro, the Japanese yen and the British Pound.
The countries that issue these fiat currencies have all begun their respective investigations into issuing central bank digital currencies (CBDCs). One of the leaders of the Bank of England used the term ‘New Monetary Order’ for referring to CBDCs. This might be all well and good, but it is best to avoid this kind of talk, at least for now. Otherwise, it could give rise to a lot of conspiracies that no one wants to hear at least now.