Towards an effective regulatory and governance framework for central bank digital currencies

The issue and use of a central bank digital currency (“CBDC”) is presently being actively investigated by governments around the world. While the financial and technical discourse is relatively advanced, there is limited legal consideration of this critical matter. In particular, there is limited analysis of the regulatory and governance framework that should be applied to a CBDC. As a variety of common law jurisdictions are considering using distributed ledger technology (“DLT”) to issue a CBDC as a native currency, it is important to consider the impact of this disruptive technology on the present laws governing payments and markets infrastructures. In such a context, the objective of this paper is to critically analyse the current legal scholarship and legal reform discourse of nations around the world and present a taxonomy for measuring efficacy. To this end, the paper begins by developing a theoretical model for determining what constitutes effective CBDC regulation and governance. It then proceeds to apply this model to critically evaluate present CBDC laws, policies and reform discourse, focussing on those of the United States, the United Kingdom, Australia, Singapore, and Hong Kong. The paper concludes by applying the developed framework for effective regulation and governance to suggest future directions in this critical and emerging area of digital finance law.