Abstract
With the development of electronic payments and digital cryptocurrencies, central banks now possess the technical capacity to issue Central Bank Digital Currencies (CBDCs). CBDCs function as cash-replacing payment instruments—economically equivalent to existing fiat currency and classified as circulating cash. However, CBDCs lack classification as movable property, face device-dependent limitations that challenge their legal tender status, and conflict with traditional definitions of fiat currency. This article argues that CBDCs share identical properties with physical cash and should be integrated into the fiat monetary system. We propose redefining CBDCs as special claims on central banks and suggest corresponding legal framework modifications.
Keywords: Electronic Payments, Digital Currency, Sovereign Currency, Central Banks, Blockchain
Introduction
The rapid advancement of financial technology and blockchain has transformed payment systems, introducing innovations like electronic payments and cryptocurrencies. During a 2019 collective study session chaired by President Xi Jinping, China emphasized blockchain’s strategic role in digital finance. Globally, projects like Facebook’s Libra—a non-sovereign stablecoin—have spurred central banks to explore CBDCs. While technical research on CBDCs is abundant, their legal status remains unclear, particularly regarding compatibility with existing fiat definitions.
Core Issues
- Legal Definitions: Traditional jurisprudence defines money narrowly as state-issued, movable legal tender with compulsory acceptance (legal tender status). CBDCs challenge this framework due to their digital nature and reliance on infrastructure.
- Economic Consensus: Money’s validity stems from societal "uniform agreement," historically achieved through sovereign backing. Extending this principle to CBDCs requires legal adaptation.
- Future Trends: The rise of decentralized currencies (e.g., Bitcoin, Libra) necessitates reevaluating monetary paradigms to accommodate potential supranational digital currencies.
Part 1: The Evolution Toward CBDCs
1.1 Electronic Payments and Their Limitations
Electronic payments (e.g., credit cards, third-party platforms like Alipay) dominate modern transactions but suffer from systemic flaws:
- Fragmentation: Platforms operate in silos, lacking interoperability.
- Regulatory Gaps: Current laws (e.g., China’s E-Commerce Law) provide incomplete oversight compared to dedicated frameworks like the EU’s PSD2.
- Data Monopolies: Private payment processors aggregate vast datasets, distorting competition and monetary policy efficacy.
Example: China’s non-bank payment systems handle over 5.11 billion transactions annually (CNNIC, 2017) but exclude institutional/governmental use cases.
1.2 Cryptocurrencies as Catalysts
Blockchain-enabled currencies (Bitcoin, Ethereum) introduced:
- Decentralized Trust: Distributed ledger technology (DLT) eliminates reliance on central authorities.
- Transparency: Immutable transaction records enhance security.
- Challenges: Anonymity facilitates illicit activities; price volatility hinders adoption as stable media of exchange.
Case Study: Libra proposed a stablecoin backed by reserve assets, prompting central banks to accelerate CBDC initiatives to maintain monetary sovereignty.
1.3 Technological Readiness
DLT variants now support scalable CBDC architectures:
- Flexibility: Adjustable consensus mechanisms cater to regulatory needs.
- Efficiency: Enable real-time, high-volume settlements at reduced costs.
👉 Explore how blockchain innovations are reshaping finance
Part 2: Legal Reconceptualization of CBDCs
2.1 The "Claim Theory" of Money
Scholars posit that money’s essence aligns with specialized debt obligations:
- Central Bank Liability: CBDCs represent claims on the issuer, akin to traditional cash.
- European Central Bank Model: Frameworks treat currency as institutionalized claims on monetary systems.
2.2 Legislative Adjustments Needed
- Redefining Legal Tender: Amend laws to recognize digital forms without physical possession requirements.
- Ownership Rules: Adapt "possession equals ownership" principles to digital contexts to ensure payment finality.
FAQs
Q1: How do CBDCs differ from cryptocurrencies like Bitcoin?
A: CBDCs are state-backed and legally recognized, whereas cryptocurrencies operate without sovereign guarantees and face regulatory uncertainty.
Q2: Can CBDCs coexist with physical cash?
A: Yes—CBDCs are designed to complement, not immediately replace, existing monetary forms.
Q3: What risks do CBDCs address?
A: They mitigate payment fragmentation, enhance monetary policy precision, and counter private data monopolies.
Q4: Will CBDCs compromise user privacy?
A: Design varies by jurisdiction; some models prioritize anonymity, while others enable transaction traceability for compliance.
Conclusion
CBDCs mark a pivotal shift in monetary systems, demanding synchronized legal and technological innovation. By integrating digital and traditional currencies under a unified framework, policymakers can harness efficiency gains while preserving monetary stability. The transition requires global cooperation to address emerging supranational currency models.