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The European Central Bank (ECB) published a collection of papers presented at the September 5-6, 2022 European System of Central Banks (ESCB) Legal Conference, including three on the legal aspects of central bank digital currency (CBDC) interoperability. A paper by Jess Cheng and Joseph Torregrossa discusses the concept of "legal interoperability" in the domestic payment system and its relevance to the retail CBDC context, particularly as the necessary legal foundation for transferability and convertibility. The second by Panagiotis Papapaschalis makes the case for exposing and overcoming technical and legal obstacles to interoperability ex-ante and early on, rather than trying to tackle them ex post, i.e. only when the various, diverging, CBDCs have gained momentum. The third paper, by Seraina Grünewald, focuses particularly on the prospects and challenges for the legal interoperability of a digital euro.

This paper delves into the proposals for regulating the digital euro, establishing a connection between its legal standing and physical euro cash, and requiring payment services providers to offer digital euro services regardless of their location. It raises questions about the fundamental implications of treating the digital euro as legal tender. However, labelling the digital euro as a legal tender raises uncertainties about its core nature and purpose. The analysis challenges the notion that the digital euro is merely a digital version of physical cash, emphasising the evolving roles of central bank digital currencies and their legal and policy ramifications. With the digitalisation of the economy in mind, it examines how the involvement of payment services providers in distributing the digital euro could impact individual and economic rights. It underscores the importance of balancing security measures, privacy, and data protection while fostering competition. The paper aims to provide policymakers with insights into the design and regulation of the digital euro, underlining the necessity of clarifying its legal standing and reconsidering its classification as legal tender.

A University of Cambridge Centre for Alternative Finance report examined legal and regulatory challenges arising from the emergence of digital assets. The aim is to frame future legal and regulatory discussions around digital assets, as well as to identify general trends and concepts across jurisdictions rather than to provide granular analysis of any given jurisdiction's legal position. It found that existing taxonomies of digital assets have failed to fully capture the relevant features of digital assets and the true novelty introduced by crypto-assets. Also, digital assets, for the most part, pertain to existing and well-known legal concepts: they effectively represent a set of rights embodied in a new digital form. Consequently, the regulatory perimeter for regulating digital assets and associated activities should be determined by identifying the legal concept(s) behind a given digital asset. However, digital assets may warrant adjustment or revisions to existing legislation, in particular whether digital assets are fitting objects of property rights.

The UK Jurisdiction Taskforce's Legal Statement on the Status of Cryptoassets and Smart Contracts is proving to be influential both domestically and internationally for its analysis of the legal status of cryptocurrency.  The Legal Statement recognised that the design of cryptoassets may create some practical obstacles to legal intervention but "that does not mean that crypto assets are outside the law".  This is now developing into a trend.

The IMF published a paper that presents a practical legal-analytical framework to assess how private law rules can be designed to support the wide circulation and safe holding of token-based central bank digital currency (CBDC) primarily intended for retail use. It follows a previous IMF working paper that examined the legal foundations of CBDC under central bank law and its treatment under monetary law-the main public law aspects of CBDC. A private law framework is also needed, because unlike account-based CBDC, token-based CBDC constitutes from the legal perspective a new form of money and hence raises a lot of challenges under private law. This legal nature will shape how token-based CBDC can be transferred, held in custody, "deposited" with commercial banks, and pledged. It is also be crucial that private law rules establish with certainty how ownership and other rights in token-based CBDC can be transferred between economic agents. In most jurisdictions, the private law regime for token-based CBDC will likely need to be augmented by a comprehensive legislative intervention to provide a sufficiently robust and predictable legal foundation for this new digital currency. In designing such a legislative framework, countries will need to consider carefully whether to anchor it in a broader framework for digital money or assets.

A Law Faculty of the University of Oxford paper examined the legal risks of depositing crypto-assets with custodians in the event of insolvency, and suggests ways that regulation and legal practice can help to mitigate this risk. However a lack of international standards related to the legal status of crypto-assets, along with the global nature of blockchain-based transactions, can make it hard to determine which laws apply. https://www.law.ox.ac.uk/business-law-blog/blog/2020/06/failed-hopes-disintermediation-crypto-custodian-insolvency-legal

This IMF paper reviews how central banks have been reacting to the challenges posed by fintech to the legal foundations of their governance. It finds that fintech calls for reconsidering the adequacy of the legal formulation of currency issuance and payment systems functions and powers. Fintech may impact the functional autonomy for some key central bank functions. For example, the role claimed by governments in designing CBDC will be an important issue to consider; the legal framework will need to carefully delineate the respective roles and responsibilities between the government and the central bank. The authors suggest that central bank law reform must be sufficiently broad to achieve appropriate levels of "agility" to provide a "future-proof " legal framework. For instance, legislation (and by extension the legal framework to which the central bank is subject) should to the maximum extent possible be technology-neutral.

"This white paper offers the first comprehensive overview and explanation of legal wrappers available to DAOs. It observes how the qualitative features of DAOs-including their dispersed and fluid memberships, and blockchain-based governance-are unanticipated by legal wrappers modeled after 20th century corporations, nonprofits and partnerships. It then surveys a diverse range of wrappers available to DAOs, and highlights how thoughtful legal engineering can help mitigate frictions that arise when attempting to wrap established legal forms around DAOs and DAO operations. To demonstrate, the white paper proceeds through a variety of fact scenarios spanning protocol, media, collector, social, and philanthropic DAOs to illustrate how wrappers might be employed to protect DAO participants from unlimited liability, optimize tax treatment, engage in contractual off-chain transactions, and enable compliance with key regulatory expectations."

The Bank for International Settlements (BIS) published reports on retail central bank digital currency (CBDC) system design and legal considerations. They were written by a group comprised of the BIS and 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). The system design paper provides perspectives on overall system design and four key issues: privacy, cyber security (including quantum computing), offline functionality and point of sale considerations. The legal paper examines key legal questions, focusing 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.

Few things in monetary economics are more foggy than the concept of legal tender. Using the vernacular meaning of the term, Bukele's announcement is A BIG DEAL. If something is legal tender in the popular sense, then it has been declared to be official money. Salvadoreans would be able to walk into any supermarket and see bitcoin-denominated prices, and insist on paying with bitcoin. But the vernacular differs from the lawyer's much narrower definition of legal tender (indeed, there are a couple of legal definitions). A lawyer would probably dismiss Bukele's move as unimportant.

The IMF published a paper that explores the similarities and differences between distributed ledger technology (DLT) based tokens and traditional legal instruments in commercial law, and how such tokens could offer superior solutions. However, to get there the law should recognize and define DLT and smart contracts to include them within existing legal mechanisms and recognize their effects in transferring tokens and generating rights for parties. In this regard, it is critical to ensure that there is a connection with valid legal effects between DLT and off-line assets and services. In addition, it is necessary to establish rules that allow the use of DLT as evidence, and resolve issues of unlawful transfer (loss, coercion, and fraud). Remedies must exist to protect the rights of legitimate token holders, but good faith acquirers for value must also be protected.

International Monetary Fund (IMF) spokesman Gerry Rice reportedly said Fund staff will meet later on Thursday (June 10) with El Salvador President Nayib Bukele to discuss the recently passed bitcoin law that gives bitcoin legal tender status in the country. Rice reportedly said "adoption of bitcoin as legal tender raises a number of macroeconomic, financial and legal issues that require very careful analysis." El Salvador is also in discussions with the IMF seeking a near $1 billion program.

This note summarises the themes and highlighted issues discussed at a January 26, 2021 webinar on the legal aspects of digital currencies, hosted by the Bank for International Settlements Innovation Hub and the Financial Stability Institute. Jurisdictions are devoting a great deal of attention to their legal frameworks to address the specific features of different types of digital currencies. While progress is being made, there is more work to be done. The legal design choices that can be made in response to the issues highlighted in the webinar would have consequences for the way in which digital currencies are treated in relevant jurisdictions.

A case currently being heard in Europe's top court could have a major bearing on the future of banknotes in the region. The case asks the court to define the term 'legal tender'. The judgement will be delivered in the Autumn. The hearings relate to a legal challenge against the Hessischer Rundfunk, the German public broadcaster, which is accused of not accepting payments for an obligatory fee in euro cash. The plaintiffs argue that this refusal is in violation of the status of euro banknotes and coins as legal tender. A final ruling on the case is expected in the autumn.

The Executive Council of Macau, a special administrative region (SAR) of greater China, has completed discussing a draft bill proposing to include digital forms of currency as acceptable legal tender. Macau has relatively strong legal tender laws. Anyone who rejects or refuses to accept legal tender in payment will be fined between $123 and $1,237 (1,000 and 10,000 patacas). The bill will now be forwarded to the Legislative Assembly for further deliberations.

A bill has been introduced into the Arizona state senate that seeks to add bitcoin to the list of instruments considered legal tender and a lawful medium of exchange in Arizona, enabling residents to pay debts, public charges, taxes and dues with the crypto-asset. What is not clear to me is whether Arizona has what I call a "strong-form" legal tender, by which it's illegal to refuse payment in legal tender, and whether such a law is enforced. Otherwise it's quite toothless and meaningless.

The Central Bank of Honduras debunked chatter about bitcoin becoming legal tender in the country. However, it continues to study the conceptual, technical and legal aspects that would determine the feasibility of issuing CBDC that would be recognized as legal tender.

The People's Bank of China started research on legal digital currency as early as 2014 and has been in a leading position. China's legal digital currency (DC/EP) has five advantages: solid credit endorsement, huge user base, strong user habits, leading theoretical framework, and RMB internationalization. In 2019, the People's Bank of China basically completed the top-level design, standard formulation, function research and development, and joint debugging and testing of legal digital currency. In 2020, starting from April when the new crown pneumonia epidemic was brought under control in China, DC/EP began a small-scale pilot work.

"This article addresses the question in which manner a consortium using a collaborative blockchain can be organized legally. In this article, we distinguish between the (1) "contract solution" and the (2) "legal person solution". Not only national but also cross-border collaborations can essentially be organized by these solutions. Furthermore, we illustrate the advantages and disadvantages of bilateral and multilateral contractual governance in detail. This will be done against the background of the laws of Germany."

Agustín Carstens, General Manager of the Bank for International Settlements (BIS), gave a speech focused on the need for central bank digital currency (CBDC) legal frameworks to advance if CBDC is to deliver on its potential. Unfortunately, in many jurisdictions, outdated legal frameworks could hinder their deployment, and work to address these issues needs to begin in earnest. A CBDC also needs to function within a framework of clearly defined rights and obligations. At least three core elements must be preserved: the privacy of CBDC users and the protection of their data; the integrity of the financial system; and the ability of users to choose between CBDC and other forms of money. These are fundamental issues and the legal framework for CBDC must get them right.