On 14 January, a post on the IMF Blog says that countries are moving fast toward creating digital currencies – but, in fact, close to 80% 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. The IMF has reviewed the central bank laws of 174 IMF members and found out that only about 40 are legally allowed to issue digital currencies. Digital currencies can take different forms, and the IMF analysis focuses on the legal implications of the main concepts being considered by various central banks. For instance, where it would be “account-based” or “token-based.” The first means digitalising the balances currently held on accounts in a central banks’ books; while the second refers to designing a new digital token not connected to the existing accounts that commercial banks hold with a central bank. The post says that the creation of central bank digital currencies (CBDC) 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; CBDC will need robust legal foundations that ensure smooth integration to the financial system, credibility and broad acceptance by countries’ citizens and economic agents.
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