Central bank digital currencies: legal and system design considerations

A group of seven central banks (Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Board of Governors of the Federal Reserve System, Sveriges Riksbank and the Swiss National Bank) together with the Bank for International Settlements, have been working together to explore selected aspects of central bank digital currencies (CBDCs) for the public ("general purpose" or "retail" CBDC). To date, no member jurisdiction has yet decided to proceed with a retail CBDC. 

Since its formation, the group have published a report in October 2020 setting out the common foundational principles and core features of a CBDC, an executive summary and three detailed reports on system design and interoperability, user needs and adoption and financial stability implications in September 2021 and a note on policy perspectives in May 2023. The group has now progressed on better understanding selected key legal and system design aspects of retail CBDC which are summarised in the following two papers – without drawing specific policy conclusions: 

The legal paper examines some key legal questions that may need to be addressed by any jurisdiction considering issuing a retail CBDC but does not attempt to provide definitive answers to those questions. It focuses on four areas: the legal classification of retail CBDC; the obligations and liabilities of participants in the retail CBDC ecosystem; privacy and financial crime and cross-border issues. 

A jurisdiction considering issuing a retail CBDC might need to decide on the appropriate legislative, regulatory and contractual rules for its retail CBDC, having regard to its own legal framework, and its CBDC design and policy aims. Considerable legal work might be needed in each jurisdiction to identify and address the range of legal issues. 

Meanwhile, the system design paper provides some perspectives on overall system design and then focuses on four key issues for designing a well-functioning retail CBDC system: privacy, cyber security (including quantum computing), offline functionality and point of sale considerations. These issues are muti-dimensional and often interconnected. Given the scale of interconnectedness, both within and beyond the system, central banks may likely need to draw on expertise from both across their institutions, as well as from the private sector, to ensure a holistic approach.

Reflecting this, the group have worked closely across different topics. As part of this joint work, the group shares insights and perspectives gained from the central banks' individual analysis and experiments on a range of CBDC-themes.