Function follows Form or Form follows Function – The Legal Nature of CBDC

Abstract

Abstract 211Central Bank Digital Currency (CBDC) is often described as the future of money, pictured to function as a new, widely adopted means of payment. Whilst economic and public law implications of CBDC issuance have received close scrutiny, private law issues – especially the question of CBDC’s legal nature – have received little attention. This is surprising, given that the function of money as a means of payment is primarily shaped by the private law framework. So far, this framework is tailored to money’s specific forms of appearance, either as (tangible) property or as (intangible) claims against financial intermediaries. Early research has sought to simply classify CBDC within this dichotomy, according to its design respectively being token or account based. Assuming a German private law point of view, this paper will put such classification to the test as regards the intended “European CBDC”, the digital euro. It will show that the focus on token versus account is misguided and ultimately unhelpful, as the digital euro would in neither form fit within the existing legal framework. Drawing on the discussions surrounding the legal nature of cryptocurrencies and cryptoassets, as well as the recent experience with the dematerialisation of securities, it will be argued that the envisioned dematerialisation of cash offers the opportunity to re-think the legal nature of such new money, based not on its form, but on its function as a circulating means of payment. Putting function before form allows technology-neutral answers to related issues, such as the legal assessment of CBDC transfer, ultimately equipping private law for the future of money.