Although countries are moving towards the creation of central bank cryptocurrencies (CBDC), according to the International Monetary Fund (IMF), about 80% of the world’s central banks do not have laws that authorize them to issue of the same or there is no clear legal framework in this regard.
The body reviewed the laws of the central banks of the 174 member countries and found that only 40 of them, 23%, are expressly authorized to issue the CBDC. 104 central banks or 61% of the total are only authorized to issue physical notes and coins.
In the remaining 16%, the IMF notes in a report on CBDCs, existing laws are unclear regarding the issuance of digital currencies. In short, almost 80% of banks could not legally issue central bank cryptocurrencies, without the approval of new legal regulations.
Only 23% of central banks could legally issue a digital cryptocurrency. Source: IMF.
The IMF maintains that, in the case of CBDCs, already raised in many countries, their issuance is not a merely technical detail, since all issuance of money “is a form of debt for the central bank”says the body. “The process must have a solid foundation to avoid legal, financial and reputational risks for the institutions,” he says. It also states that it is necessary to ensure that the “potentially contentious” innovation that constitutes the CBDC is aligned with the mandate of the respective central bank.
To be classified as currency, a means of payment must be considered as such by the laws of the country and be denominated in the national monetary unit. A currency typically enjoys legal tender status, which means that debtors can pay their obligations by transferring it to creditors.
International Monetary Fund.
Another important requirement to use a digital currency, according to the IMF, is that there must be a digital infrastructure, composed of laptops, smartphones and connectivity. Governments, however, cannot impose CBDCs on citizens, Therefore, assigning the legal tender attribute to a central bank digital instrument can be challenging, according to the IMF.
There are also two approaches to central bank digital currencies, the IMF adds: account-based and token-based. The former would require digitizing the account balances in the central bank’s books, while the latter refer to the designation of a new digital token that is not related to the accounts that the different banks have at the central bank.
Are digital currencies money?
In announcing the publication on Twitter of the study on digital currencies, the IMF is proposing a survey with the question “Are digital currencies really money?” At the time of writing this article, 79.9% of those who responded answered affirmatively. This vast majority could indicate a high degree of familiarity of Twitter users with cryptocurrencies, or at least their existence.
There are still doubts about the effects of the creation of central bank cryptocurrencies. Specifically, CriptoNoticias carried out an analysis on the impact of CBDCs on the financial system, regarding maintaining the anonymity of cash or if, on the contrary, its creation would mean increasing monetary surveillance on individuals.