The issuance of a Central Bank Digital Currency (CBDC): legal and economic challenges

Abstract

Although the interconnection between technology, finance, and money has always been consistent, in the last decade the proliferation of digital technology has generated unprecedented transformative changes to the financial and monetary systems. Breakthroughs include the growth of FinTech payment solutions, the emergence of Bitcoin and altcoins, and the imminent launch of Facebook’s global stablecoin. These acted as a catalyst pushing several central banks to research the possibility of issuing a Central Bank Digital Currency (CBDC). This thesis aims to investigate the major legal and economic challenges of introducing CBDC within the EU and other selected jurisdictions. To achieve this goal, the legal basis for issuing such a currency is analyzed. Next, this research examined how CBDC would be treated by the monetary law as a new means of payment with the legal tender status. Moreover, the potential impacts on financial stability, monetary policy, and the banking sector are studied. While increasingly stronger motivations are driving many central banks towards the issuance of a CBDC, this thesis concludes that resolving such legal and economic challenges is the sine qua no for its launch. However, this may require amendments to the existing legal framework