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- According to the International Monetary Fund (IMF), Bitcoin, Ethereum and XRP (Ripple) are classified as “quasi-monetary units”.
- In the case of the introduction of a Central Bank Digital Currency (CBDC), cryptocurrencies should be clearly delineated.
The International Monetary Fund (IMF) recently published a working paper titled “Legal Aspects of Central Bank Digital Currency: Monetary and Central Bank Law Considerations” in which it analyzes the legal basis of a central bank digital currency (CBDC) in the central and monetary banking sector. law. Interestingly, the IMF has also looked into the legal status of cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH) and XRP.
In general, the IMF first notes that, in the absence of a legal basis, issuing a CBDC entails legal, financial and reputational risks for central banks. Therefore, most central banking laws currently do not allow the issuance of a CBDC to the general public. Second, “it is not obvious from a monetary law point of view that a CBDC can be granted ‘currency’ status”.
In particular, the second “C” in CBDC for “currency” raises fundamental legal issues. According to the IMF, a general distinction must also be made between “central bank money from private money, such as credit balances on accounts in commercial banks (i.e. the latter’s liabilities) or cryptocurrencies (which are potentially not liabilities at all. , such as Bitcoin) “.
Bitcoin, Ethereum and XRP must be distinguished from official monetary units
According to the IMF, a “currency” can be defined as the official currency of a state / monetary union, recognized as such by the “monetary” law. And since most currency laws reserve currency status for central bank-issued notes and coins, these are solely the US dollar, euro, and other fiat currencies. Therefore, a clear distinction must be made between cryptocurrencies and official currencies.
Examples of official currency units are the dollar in the United States, the euro in the euro area and the yen in Japan. These monetary units are clearly established by relevant legislation and must be distinguished from unofficial quasi-monetary units (such as BTC (Bitcoin), ETH (Ethereum) and XRP (Ripple)) which are not established by law.
Furthermore, the IMF also states that money or legal tender money must be distinguished from the concept of money. While there is no generally accepted legal definition of money, it is generally accepted that the legal term “money” is broader. In addition to currency (banknotes, coins), in many jurisdictions it also includes certain types of assets or instruments that are easily convertible or redeemable in currency, such as book money or even cryptocurrencies.
Some assets (for example, Bitcoin) may be considered money under one body of law (for example, VAT law), but not under another (for example, financial law).
In response to the question of whether central banks should be granted a monopoly for issuing digital currency, the report says that from a legal standpoint, extending the current issuing monopoly to digital currencies is not complicated. The current monopoly provisions should only be extended to the digital currency.
However, whether a central bank monopoly for digital currency is desirable or appropriate is ultimately a matter of political decision. Ultimately, according to the IMF, this would mean:
[…] that private issuers, and commercial banks in particular, would not be allowed to issue digital tokens incorporating “bearer on demand” currency credits. (Those tokens would be different from cryptocurrencies like Bitcoin, which do not incorporate such claims and are legally more like a commodity.)
IWF working document
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