IMF: Only 23% of Central Banks Can Legally Issue Digital Currencies

Nearly 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.

Recently, researchers of the International Monetary Fund (IMF) has studied the central bank laws of 174 members to find whether digital money is really money or not in the legal sense. The final result shows that only about 23%, or 40 central banks, legally allowed the issuance of digital currencies.

According to the reseachers, in order 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. A currency typically enjoys legal tender status, meaning debtors can pay their obligations by transferring it to creditors.

Therefore, legal tender status is usually only given to means of payment that can be easily received and used by the majority of the population. That is why banknotes and coins are the most common form of currency.

Notably, 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. 

The IMF staff also mentioned some legal issues raised by the creation of central bank digital currencies (CBDCs). Among the areas of concern are "tax, property, contracts, and insolvency laws; payments systems; privacy and data protection; most fundamentally, preventing money laundering and terrorism financing," the IMF researchers described.

Many means of payments widely used in advanced economies are neither legal tender nor currency.