Legal Issues regarding Central Bank Digital Currency: Bank of Japan edition

Bank of Japan formed a Study Group on Legal Issues regarding Central Bank Digital Currency (CBDC).

Here is a summary of the report of the study group:

Based on four stylized models of CBDC issuance, the Report discusses what legal issues would arise within the Japanese legal framework if the Bank of Japan were to issue its own CBDC.

The Report finds a wide range of issues to be addressed. These include, among others, whether or not CBDC can be regarded as legal tender; what would happen in the case of counterfeit or duplication under current private law; whether or not issuance of CBDC is consistent with the purposes of the Bank as currently specified by the Bank of Japan Act; and whether the Bank can restrict the use of CBDC by certain individuals. The Report also discusses the legal issues related to the acquisition of information with respect to Anti-Money Laundering and Counter-Terrorism Financing (AML/CFT) regulations; protecting personal information; and the penalties for counterfeiting/duplicating CBDC as Crimes of Counterfeiting of Currency under current criminal law.

The four models are shown nicely using flow of funds from one entity to another:

Figure 1 : Models of CBDC (image)

  • (Model 1) Account-based CBDC and direct provision of CBDC

    Account-based CBDC and direct provision of CBDC(image).The details are shown in the main text

  • (Model 2) Token-based CBDC and direct provision of CBDC

    Token-based CBDC and direct provision of CBDC(image).The details are shown in the main text

  • (Model 3) Account-based CBDC and indirect provision of CBDC

    Account-based CBDC and indirect provision of CBDC(image).The details are shown in the main text

  • (Model 4) Token-based CBDC and indirect provision of CBDC

    Token-based CBDC and indirect provision of CBDC(image).The details are shown in the main text

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