Central Bank Digital Currencies: Preliminary Legal Observations

Journal of Banking Regulation (2019)

30 Pages Posted: 17 Feb 2019 Last revised: 31 Mar 2020

See all articles by Hossein Nabilou

Hossein Nabilou

University of Amsterdam, Amsterdam Law School; The International Institute for the Unification of Private Law (UNIDROIT)

Date Written: February 6, 2019


Breakthroughs in financial technology (fintech), ranging from early coins and banknotes to card payments, e-money, mobile payments, and more recently, cryptocurrencies portend transformative changes to the financial and monetary systems. Bitcoin (BTC) and cryptocurrencies bear a significant resemblance to base money or central bank money (CeBM). This functional similarity can potentially pose several challenges to central banks in various dimensions. It may pose risks to central banks’ monopoly over issuing base money, price stability, the smooth operation of payment systems, the conduct of monetary policy, and to the stability of credit institutions and the financial system. From among several potential policy responses, central banks have been investigating and experimenting with issuing central bank digital currency (CBDC). This paper investigates CBDC from a legal perspective and sheds light on the legal challenges of introducing CBDC in the euro area. Having studied the potential impact of issuing CBDC by the European Central Bank (ECB), particularly on the banking and financial stability, the efficient allocation of resources (i.e., credit), as well as on the conduct of monetary policy, the paper concludes that issuing CBDC by the ECB would face a set of legal challenges that need to be resolved before its issuance at the eurozone level. Resolving such legal challenges may prove to be an arduous task as it may ultimately need amendments to the Treaty on the Functioning of the European Union (TFEU).

Keywords: Central Bank Digital Currency, Central Bank, European Central Bank, Cryptocurrency, Bitcoin, Money

JEL Classification: E42, E51, E58, G01, G23, G28, K22, K23, K24

Suggested Citation

Nabilou, Hossein, Central Bank Digital Currencies: Preliminary Legal Observations (February 6, 2019). Journal of Banking Regulation (2019), Available at SSRN: https://ssrn.com/abstract=3329993 or http://dx.doi.org/10.2139/ssrn.3329993

Hossein Nabilou (Contact Author)

University of Amsterdam, Amsterdam Law School ( email )

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