Legal Considerations for the Deployment of a Central Bank Digital Currency

The exploration of a Central Bank Digital Currency (CBDC) by any central bank or monetary authority can be significantly aided by conducting a pilot project to gain a practical understanding of the implications of mainstreaming CBDC. Such pilot projects and, indeed, a full implementation alike must account for the legal ramifications of its potential introduction. The form factor of a CBDC, being a digital representation of a physical currency, has often been debated as to whether it conforms to the form of a currency currently recognised by the laws in most jurisdictions. However, beyond the discussion and debate on whether or not CBDC qualifies indubitably as currency, this is aimed at ensuring that any exploration of this novel concept is adequately supported by explicit and unambiguous legal provisions.

The successful pilot testing of the eCedi, Bank of Ghana’s CBDC, provided practical insights into the legal implications of testing or implementing a CBDC. This paper seeks to offer basic guidance to any central bank or monetary authority that is considering exploring a CBDC.

Legal Requirements and Implications at the Pilot Stage

A CBDC pilot project represents the exploratory phase of designing, developing, and testing a state-backed digital currency controlled and regulated by a central bank. This primarily entails the conceptualisation of the CBDC’s technical and functional parameters, development and controlled testing, restricted usage among a limited set of users to observe real-world implications, and subsequent evaluation of the CBDC for refinement. The ultimate objective is to establish the value and viability of permanently issuing a CBDC in a country.

Although a CBDC pilot project represents an exploratory phase, there are still some preliminary legal considerations and steps required to be taken to enable the execution of the pilot project. The following are some of such legal considerations.

Pre-Contracting Stage: Establishing a Mandate

A Legal Review to establish the legal basis for exploring CBDC in a pilot environment. This is often feasible in most jurisdictions as a pilot is not a real-life implementation. Such experimentations are often ...

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