Researchers from the International Monetary Fund (IMF) have examined the central banking laws of 174 IMF members to answer the question of whether a digital currency is real money. They found that of all central banks surveyed, only about 23%, or 40 central banks, are “legally allowed to issue digital currency”.
IMF is investigating whether digital currency is money
The IMF published a blog post on Thursday examining whether digital money is real money in a legal sense. The post was written by Catalina Margulis, an adviser in the Financial and Tax Law Division of the IMF Legal Department, and Arthur Rossi, an investigative officer in the same department.
The authors expressed their own views and began by noting that “nearly 80 percent of the world’s central banks are prohibited from issuing digital currency under their existing laws, or the legal framework is unclear.” They continued:
To help countries make this assessment, we reviewed the central bank laws of 174 IMF members … and found that only about 40 are legally allowed to issue digital currencies.
Prior to the publication of this blog post, the IMF organized a poll on Twitter asking people to vote on whether they think digital currency is real money. Of the 95,256 votes collected, 79.9% said yes.
What qualifies as currency
The IMF researchers noted, “In order to be legally eligible as a currency, a means of payment must be considered as such by the laws of the country and must be expressed in the official currency. A currency usually has legal tender status, which means that debtors can pay their obligations by transferring them to creditors. They detailed:
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. Therefore, banknotes and coins are the most common currency.
The authors noted that in order to “use digital currency, digital infrastructure – laptops, smartphones, connectivity – must first be there.” However, they pointed out that “governments cannot impose on their citizens to have it, so assigning legal tender status to a central bank digital tool can be challenging.”
IMF employees also mentioned some legal issues raised by the creation of central bank digital currencies (CBDCs). Areas of focus include “taxes, property, contracts and insolvency laws; payment systems; privacy and data protection; most fundamental is to prevent money laundering and terrorist financing, ”said IMF researchers.
In conclusion, while noting that “Without the legal tender designation, reaching full currency status could be equally challenging,” the researchers stressed:
Many of the means of payment widely used in advanced economies are not legal tender or currency.
Do you think digital currency is money? Let us know in the comments below.
Image Credits: Shutterstock, Pixabay, Wiki Commons, IMF, Twitter
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