The International Monetary Fund (IMF) has published a comprehensive analysis of the legal framework for central bank digital currencies (CBDCs). By examining the central bank laws of 174 IMF member countries, researchers found that only about 23% (40 central banks) are legally authorized to issue digital currencies. This finding underscores the significant legal hurdles facing the global adoption of CBDCs.
Legal Gray Zone: Most Central Banks Not Permitted
Catalina Margulis, a consulting counsel in the IMF's Legal Department, and Arthur Rossi, a research officer, noted in a blog post that "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." They explained that legal tender status is typically granted only to payment methods that can be easily received and used by the majority of the population, such as banknotes and coins. Digital currencies, however, require digital infrastructure — laptops, smartphones, connectivity — which governments cannot mandate. This makes granting legal tender status to a central bank digital instrument challenging.
What Qualifies as Currency?
To legally qualify as currency, a means of payment must be considered as such by a country's laws and be denominated in its official monetary unit. Legal tender status means debtors can pay their obligations by transferring it to creditors. Yet many widely used payment methods in advanced economies, such as mobile money or private stablecoins, are neither legal tender nor currency. The IMF emphasizes that while digital assets can serve as money in practice, achieving full legal currency status remains an uphill battle without explicit legal recognition.
Compliance Minefield: Tax, Privacy, and AML
The creation of CBDCs raises numerous legal issues: tax, property, contract and insolvency laws, payment systems, privacy and data protection, and most fundamentally, anti-money laundering and combating the financing of terrorism. The IMF warns that governments must carefully navigate these compliance challenges. For instance, if digital currencies cannot be effectively monitored, they could be exploited for illicit activities; conversely, excessive surveillance could violate privacy rights. These trade-offs require careful legal design.
Public Opinion: Is Digital Money Real Money?
Before the blog post, the IMF conducted a Twitter poll asking: "Do you think digital currencies are really money?" Out of 95,256 votes, 79.9% said yes. While the public overwhelmingly sees digital currencies as money, the IMF's legal analysis remains cautious. Many widely used payment methods are neither legal tender nor official currency, yet they perform monetary functions. The digital age is challenging traditional definitions of money, and the legal foundations are still being built.