上海市光明律师事务所-官网-CBDC在跨境交易应用中的法律和监管挑战

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CBDC在跨境交易应用中的法律和监管挑战 | 光明涉外①

2024-06-19 143

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Abstract

The Central Bank Digital Currency (CBDC) is a digital currency with the character of legal tender, with the government and central bank acting as the regulator.1In today’s financial system, CBDC is expected to enable more efficient and cost-effective cross-border and cross-currency payments.2 Cross-border CBDC trials have been conducted in many countries around the world and have identified the impact of a variety of factors,including technology, law and policy.3 In particular, issues such as uneven regulatory regimes and the complexity of handling compliance checks have been identified.4 However, inconsistencies in the standards and protocols adopted by different countries have made it difficult to ensure scalable cross-border interoperability capabilities.5 As a result, central banks and other financial institutions in a number of countries have been actively exploring solutions and paths for future research through experimental activities.6 This paper attempts to explore the regulatory ideas of CBDC from the legal and regulatory perspectives, with reference to the project design and technical solutions of some countries, in order to promote more advanced cross-border payment solutions.

Keywords

CBDC, Legal Regulation, Cross-border Transactions

1. Legal Challenges and Responses

The legal challenges to the application of cross-border CBDCs centre on monetary sovereignty and jurisdiction. These two issues are discussed separately below.

1.1 Monetary sovereignty crisis

The cross-border movement of CBDCs may affect a country’s monetary sovereignty. International law recognizes that a sovereign State has sovereign authority over its currency, which no other State has the right to infringe. Monetary sovereignty essentially consists of three exclusive rights of a given State: the right to issue currency, the right to fix and change the value of the currency, and the right to regulate the use of that or any other currency within its territory.7 Today, the main threat to monetary sovereignty is currency substitution, i.e., the shift of a country’s domestic population from the use of official currencies to the use of alternative currencies, which is often referred to as dollarization. On the other hand, the digitization of currencies can intensify competition among countries.8 This could lead to a corresponding increase in the risk of digital dollarization for all countries. The degree of exposure to the effects of digital dollarization is not equal, owing to differences in the strengths and weaknesses of national monetary systems and monetary sovereignty. For countries with weaker monetary sovereignty, they may even experience currency substitution effects.9 It has been argued that the issuance of digital currencies by central banks will largely replace cash and other forms of money. This could have side effects if the central bank is responsible for the entire money supply system of the country.10 This suggests that the cross-border circulation of CBDCs may create imbalances in the international monetary system. The use of national currencies and other countries’ CBDCs may conflict. Specifically, suppose that a country relies too much on its domestic currency and does not use foreign CBDCs. In this case, the benefits of CBDCs in cross-border transactions may not be realized and the risk of inflation may increase. Without sufficient and available external currencies, the role of domestic currencies in the settlement may be weakened.11 On the other hand, home country residents may consider the costs and benefits. They may buy and save CBDCs from other countries if the home currency has higher inflation or exchange rate volatility compared to other currencies, thus posing an exchange rate risk.12 Such purchases, which are of an investment nature, create instability in the demand for and value of the currency, further threatening the country’s monetary sovereignty.

In 2019, Facebook announced its intention to launch a new digital currency called Libra, which has the potential to claim a significant share of the global payments market. The currency will be backed by financial assets and denominated in its own unit of account, enabling secure and low-cost domestic and cross-border transfers. Ultimately, consumers will be able to use Libra to purchase goods directly, reducing the need to convert private currencies into local ones.13 It provides more efficient payment instruments and systems, leading to an increased risk of substitution of traditional currencies and CBDCs in different countries.14 To mitigate this risk, China has developed an advanced DCEP system to prevent other currencies from losing their edge against digital currencies.15 Additionally, the risk of non-financial firms joining the interbank settlement system could also be reduced by limiting their access to the licensed blockchain.16 It follows that private digital currencies can also pose a threat to a country’s monetary sovereignty. With the continuous development of artificial intelligence, more convenient and efficient private digital currencies and crypto technologies may appear in the future, and the use of CBDC is being tested, creating a competitive situation between traditional currencies and CBDC. However, it is difficult for the state to restrict the innovative plans of these companies and the choice of payment currencies by citizens, so the monetary sovereignty system will face a new crisis in the future.

In Venezuela, the government has imposed formal restrictions on the use of foreign currencies in the country, limiting people’s ability to transact in US dollars.17 In 2017, Venezuela launched its own cryptocurrency, the Petro, but the results showed that the currency did little to stabilize the country’s currency or stop dollarization.18 On the contrary, such foreign exchange restrictions can be detrimental to the interests of other countries. At the international level, restrictions on the use of foreign currencies mean that foreign investors are exposed to more significant economic risk, which can have a negative impact on global trade relations and economic activities such as international investment. Domestically, it could lead to an increase in black market transactions and capital outflows, posing a challenge to financial stability. Therefore, in exploring solutions, it is vital to consider not only domestic needs but also the international implications of the policy and how it can be coordinated with other jurisdictions.19 Central banks are working to advance the “mCBDC programme”, a platform designed to protect the monetary sovereignty of each jurisdiction, subject to the principle of “do no harm”.20 This suggests that the project design places equal emphasis on the monetary sovereignty of each country, avoiding the threat of financial hegemony. However, the equal importance of multiple currencies would hinder the construction of a diversified international monetary system. Hence, this programme needs to be improved.

The model also utilizes a distributed ledger technology (DLT) to support multicurrency cross-border transfers for the exchange of foreign currencies, which can strengthen the financial infrastructure. Subsequently, the Bank for International Settlements, together with the Hong Kong Monetary Authority and the Bank of Thailand, launched the “mCBDC Bridge” project, which can work with global centralized currencies, such as the International Monetary Fund.21 This means that while the institutions attach importance to the issue of monetary sovereignty, they do not want sovereignty to become an obstacle to cooperation in the international monetary system.

States can use payment regulation to balance monetary sovereignty by facilitating some private digital currency ventures through standardized, non-bank-specific payment application program interfaces. In addition, legal means can be used for regulation. For example, the Law on Credit Institutions could be used to address state guarantees for risks associated with bank deposits. The State may mandate the use of CBDC in special cases of public administration.22 For example, in the event of severe inflation, currency devaluation, etc., the State may stabilize the monetary system by promoting the widespread use of its own CBDCs by its citizens. This suggests that the State, in response to the issue of monetary sovereignty, can impose restrictions on its own behaviour in national public affairs at the level of public power. Such limits are within the control of the state, which can adjust its official behaviour and policies in line with monetary policies and trends. But when it comes to personal restrictions on private or foreign digital currencies, the state can provide for citizens to use them only for specific purposes that pose less of a threat to monetary sovereignty. For instance, limiting their use to online purchases in the low to medium price range. US regulators have urged Facebook to move away from its multi-currency Libra program to issuing Diem, a single-currency, dollar-backed coin.23 However, it is not clear whether the Diem system will have a substantial impact on the CBDC’s monetary policy if debt contracts and bank deposits continue to be denominated in the official domestic currency.24 The European Central Bank, in response to the risks posed by the CBDC to global currency price stability and investment fraud, has launched a “Virtual Currency Initiative”, which argues that in order to control the use of currencies, the legal status of currencies can be clarified through warnings and statements.25

Some scholars have proposed that countries create “synthetic hegemonic currencies” (SHCs) composed of major CBDCs, which could balance political influence with the issue of national monetary sovereignty. However, SHCs may unfairly discourage the use of private digital currencies.26 At the same time, cross-border transactions of CBDCs and the functioning of the credit money system are in conflict and need to be harmonized. If the role of CBDCs is to be strengthened, the ability of the banking system to create money to collect savings through CBDCs needs to be reduced accordingly. However, policymakers are likely to be cautious about this measure, given the adverse impact on lending as well as on economic growth. Moreover, the simplification of central bank swap lines could reduce to some extent the exposure to non-domestic currency loans or the weight of foreign exchange reserves, but it could also have a negative impact.27 In particular, the impact of exchange rate volatility on financial stability. To address these challenges, in-depth research on statutory and jurisdictional issues is needed.

1.2 Statute and jurisdictional boundaries

There are two types of CBDC payment systems: retail CBDC for use by the public and wholesale CBDC for use by financial institutions. Retail CBDC can be further subdivided into two forms: the use of cross-border electronic payments by non-residents in visiting jurisdictions, and the use of cross-border electronic payments by non-residents located in different jurisdictions. This involves the use of the home country’s CBDC abroad. This may lead to a devaluation of the home currency and may also lead to conflict and competition between the non-resident’s home CBDC and the currency of the country of residence.28 For banks, subject to legal constraints and reciprocity agreements between different jurisdictions, any bank can open an account with the central bank that manages the distributed ledger in which it issues currency.

However, central banks in different jurisdictions are likely to incur legal risks in their interactions due to their different functions and responsibilities.29 Consideration should therefore be given to how to harmonize the application of CBDCs in the country with other jurisdictions, to standardize regulations and regulatory requirements and to reduce the impact on the international monetary legal system. Consideration should also be given to how to enhance the international competitiveness of CBDCs and to balance the situation of domestic and international circulation of the currency. Due to the high time cost of obtaining a banking license in another jurisdiction, smaller local banks tend to rely on larger banks for cross-currency transactions. As a result, most banks have established correspondent banking channels, choosing to network with foreign banks that are able to process the required payments. Accordingly, the risk of these correspondent banks increases, making the international financial system more volatile.30 For transactions, one country may have less stringent standards while other jurisdictions may have different considerations and stricter rules, and these barriers can affect the choice of counterparties. It is, therefore, necessary to develop programs to regulate the behaviour of banks and traders.

One solution to the global CBDC exchange problem is the use of w-CBDC cross-border payments in interbank payments, with regulators designing specialized digital platforms to provide a technical framework for the use of another country’s CBDCs in another currency area. Singapore and Thailand have also been active in developing digital platforms, “nexus”, designed to address jurisdictional issues. DLT technology can decentralize the legal risks of hacking and data tampering. Decentralized systems allow data nodes that have been agreed upon by countries to be linked together, forming a public ledger on which specific people can write, but the ownership of assets cannot be forged.31 DLT is based on the use of smart contracts that allow users to bypass commercial banks.32 This approach has led to a relative harmonization of regulations and regulatory standards across jurisdictions, allowing for timely access to unusual transactions. Still, it does not address the fundamental issue of compatibility. The launch of the Digital Trade Alliance has enabled many banks in the Alliance countries to reduce the risk of opening accounts for financing.33 Consequently, in the design of measures, consideration needs to be given not only to data management and technological innovations but also to reducing cross-border compatibility barriers and ensuring that the system is compatible with different currency practices and preferences.34 In principle, this requires improving the interoperability of CBDCs.

The idea of an interconnected multi-CBDC system to address the above issues is to bring together many jurisdictions with similarities through an intermediary digital platform to provide CBDC services to central banks, commercial banks, and legal entities. The platform’s regime is jointly developed by the participating jurisdictions and, furthermore, the participating countries are regulated by a common legal regime.

In this model, there are harmonized mandatory and public policy-based regulations at the national level.35 However, each jurisdiction chooses a different model of interoperability, which makes it challenging to integrate the CBDC platform. There is a need for “common and credible legal arrangements” between countries.36 However, this consensus does not set out any specific criteria, nor does it indicate whether some countries can join in the future or withdraw and move to other more compatible platforms and establish cooperative relationships with other countries.

The Reserve Bank of Australia, which oversees the country’s monetary payments system, is exploring ways to make CBDCs work alongside other forms of currency with its participation in the Atom project, which aims to develop tokenized CBDCs.37 Additionally, the Dunbar project, which involves the Reserve Bank of Australia, the Monetary Authority of Singapore, the Singapore Innovation Management Centre of the Bank for International Settlements, Accenture and others, aims to test payment platforms that can support standard and more secure, faster and lower-cost cross-border interbank data exchange. The project focuses on responding to jurisdictional boundary issues, suggesting that cross-border payments be divided into settlement and non-settlement processes. The platform would handle only settlement processes and non-settlement processes would be dealt with both domestically and off-platform, subject to national regulations.38 National private law systems determine the finality of settlements and the legal status of CBDCs. This approach simplifies the system for processing cross-border payments processes and reduces the burden on the platform. It also ensures that counterparties are conducting legitimate transactions within the law. The downside, however, is that non-settlement transactions may also have complexities and special circumstances involving multiple countries, which need to be processed with the platform’s resources. If the platform is biased towards settlement processes only, it may be unfair to some countries. Efficiency is based on fairness, and it is not desirable to pursue efficient and fast solutions at the expense of justice.

2．Regulatory Challenges and Responses

The choice of legal framework and regulation is crucial to protect against the risks of currency substitution and financial instability, among others, mentioned above.However, the regulation of cross-border payments by CBDCs also faces a few difficulties, and the legal regulatory challenges, regulatory criteria, and measures for addressing them are discussed below.

2.1 Legal regulation

Regulatory difficulties may arise in different areas of law, including international law, antitrust law, and personal data protection law.39 Therefore, when confronted with legal risks, full consideration needs to be given to the different laws involved and their application.

At the level of international law, legally issued CBDCs must be recognised as enforceable by other countries. The legal regulation of cross-border payments has national attributes and requires maximum harmonisation. An international treaty approach can bring together countries with similar views and to some extent reduce the difficulty of regulation. Overall regulators, central banks, should help commercial banking systems to reduce payments that were detrimental to financial stability and consider applying mandatory and public order rules.40 Because cross-border CBDC transactions are highly relevant to public law and some serious acts may involve criminal activities organised by criminal gangs in multiple countries, regulation, and other measures may be hindered by the privacy-related legal policies of various countries. There is a need to design a reasonable legal regulatory scheme, which requires collaboration between countries and coercive intervention when necessary. With respect to the protection of personal information, the CBDC system may result in a mismatch between the privacy of the payee and the payer, creating a risk of money laundering.41 In 2017, researchers from four law enforcement agencies worked together to develop and implement tools to combat money laundering schemes and other criminal activities, to store and process evidence needed for criminal investigations, and to protect the security of personal information and other rights.42 In addition, the Financial Action Task Force on Money Laundering (FATF) can promote legal regulation to combat money laundering, terrorist financing and other threats that undermine the integrity of the international financial system. When the FATF suspects money laundering, it can report suspicious transactions to the relevant government authorities. In serious cases, it can request law enforcement authorities to freeze or seize property used for money laundering and confiscate the proceeds of the offence.43 There are many similar organizations, such as the Asia-Pacific Group on Money Laundering, that are also closely involved in combating financial criminal activities and developing frameworks for global banking institutions.44 Therefore, it is possible for these experienced and well-established organizations to legally regulate the emerging area of cross-border transactions in the CBDC. Additionally, cooperation in law enforcement could be achieved by constructing a platform for these organizations to share regulatory information with each other and to pool various expert ideas when faced with difficult issues, thereby reducing money laundering and fraud risks more accurately and efficiently.In the area of antitrust law, market domination or monopolistic behaviour by CBDCs and other banking and financial services institutions can threaten the functioning of the traditional commercial banking sector,45 with the large-scale migration of commercial bank deposits to central banks.46 Furthermore, innovations and developments in the cryptocurrency space are likely to threaten the position of the CBDC, leading to higher costs of bank financing and imbalances in the payment system. Therefore, there is a need to regulate by law the rate of use of cryptocurrency by these financial institutions.The difficulty of regulation lies in reducing the risk of the CBDC monopolising the market for banking services. The legislation on banks and the systemic model of the CBDC regime chosen by the regulator affect the regulatory framework and the risk of monopoly.47 Regulators should assess the facts, consider the relationship between the central bank and commercial banks and with other financial institutions, and, if monopolistic behaviour occurs, request penalties in a timely manner in order to reduce the risks posed by unfair competition. Alternatively, the existing regulatory regime for fiat currencies could be revised to allow digital currencies to replace paper money.48 However, the complete replacement of paper money is unrealistic and may create a risk of the monopoly of digitised currencies. A better way is for regulators to observe and assess the circulation of different institutions’ currencies in the market, and to impose timely constraints on the behaviour of the banks or other financial institutions concerned when there may be a risk of market domination. The Financial Stability Board (FSB) is an international organisation that plays a crucial role in promoting regulation and policy by coordinating national institutions and international standards. Central to its mission, the FSB has developed two reports on the regulation and assessment of crypto assets to establish an effective regulatory framework. The FSB believes that it is crucial to adopt appropriate regulatory strategies based on effective assessments to address the increasing risks of the cryptocurrency system.49 This suggests that strong regulation is vital to the stability of digital assets and that cross-border transactions must be subject to a rigorous regulatory system. Nevertheless, the FSB’s report does not specifically indicate the steps for effective assessment and regulation and how to avoid risks, and these aspects require further research.

In addition to regulating markets, central banks also need to monitor a wide range of data in the financial system to minimise the risks associated with data breaches. In CBDC cross-border transactions, central banks are directly involved in transaction processing and private data storage and must safeguard the privacy of funds and payments and maintain anonymity to the extent permitted by law.50 This helps to block the identification of information between the subjects of the transaction. It has been argued that the “blind signature” approach can balance privacy and prevent crime in digital payment systems.51 However, these methods may make it difficult to trace the source of a transaction in the event of a dispute or controversy, and some may misuse the technology to avoid regulation and taxation. The final design of the CBDC has not yet been finalised, but it is likely that it will adopt an account-based approach that is tied to a digital identity to protect digital privacy.52 This approach also facilitates the regulation of illegal activities.

As CBDC becomes more widespread, there may be a risk of a run on the banking system. If CBDC is implemented aggressively, 53 problems can lead to infrastructure failures, such as technology disruptions, Internet shutdowns, and deliberate attacks by hackers.54 These system vulnerabilities can lead to data privacy and security challenges. In particular, in cross-border transactions, security issues are more uncontrollable, and large-scale cross-border information theft and fraud are likely to occur. The European Central Bank has commented on privacy and other security issues, arguing that regulatory programmes should be designed in response to money laundering and tax issues in the digital euro.55 The Federal Reserve has also responded with a series of measures, arguing that CBDC should complement, not replace, existing forms of money and payment methods, but must protect consumer privacy. The Federal Reserve Bank of Boston and researchers at the Massachusetts Institute of Technology have collaborated on the Digital Currency Project, which is exploring security and privacy challenges and solutions by evaluating hypothetical digital currencies for real-world applications and functionality, and therefore developing related digital currency and blockchain technologies. Moreover, Accenture and the Digital Dollar Foundation have partnered to establish the independent Digital Dollar Project. This project devises a third form of currency, one that is issued by the Federal Reserve and routed through commercial banks, and allows parties to transact directly with each other, bypassing intermediaries, or intermediary accounts.56 This approach limits the bank’s access to personal information and protects data privacy to a certain extent.

2.2 Regulatory standards and governance

It has been argued that regulatory standards for CBDCs are unlikely to converge. Because the CBDC network was too decentralized and uncoordinated, it was difficult to reach consensus on policies that would guide countries only in their own national contexts. If uniform standards were used for regulation, it would upset the balance of power among different participants and create conflicts.57 For example, some countries focused on considering the protection of personal information by regulators, while others were more focused on transaction size and efficiency. In practice, some countries are reluctant to introduce CBDC experiments due to concerns about regulatory complexity, affecting the development of national CBDCs.58 There may also be regulatory competition between countries due to different regulatory objectives and tools. 59 Avoiding such competition requires the establishment of minimum regulatory standards and greater transparency in the design of CBDCs in data protection and institutions.60 In addition, the CBDC regulatory framework may be affected by different factors, such as legal and political factors, which pose obstacles. Over time, the interests and subject liability regimes considered by different countries can change. Such changes are unpredictable and can threaten in-depth cooperation and regulatory coordination between countries. However, from the perspective of cross-border use of CBDCs, a more harmonised and reliable regulatory framework is necessary. Participants conducting cross-border transactions must at least agree on regulatory standards for important issues, otherwise regulatory confusion will result. Policymakers should look at a number of strategies to deal with the above issues, and they should focus on common challenges faced by regulatory networks and then develop flexible responses.61 This will increase the transparency of transactions and reduce uncertainty in regulation.

The Bank for International Settlements (BIS) has played an important role in promoting the harmonisation of regulatory standards. However, its views on regulatory standards are similar to those of the scholars mentioned above. The BIS believes that different standards and actions are needed for globalised regulation and for countries’ own regulation, and that there are distinctions in the approach and scope of regulation for different entities. As the BIS focuses more on the user’s perception of value, which is characterised by fragmentation and subjectivity, it can have a detrimental effect on central bank liquidity and monetary policy. Therefore, future policies may include banks investigating distributed samples in payment systems on their own.62 This approach, while considering the variability across countries, may be subject to delays or refusals to conduct surveys on their own. Moreover, banks may not have proper control over their own data and their assessments may be biased. Risks may be exacerbated by the lack of appropriate third-party supervision.

In response to the above regulatory philosophy, Augustine, Managing Director of the Bank for International Settlements, suggests that “public policy regarding large-scale technology in the financial sector needs to be built on a more holistic approach that combines financial regulation, competition policy and data privacy.” Consequently, a risk-based approach to regulation is recommended, focusing on the degree of stability in financial markets as well as on outcomes. In the regulatory process, it is important to ensure that consumers in the market are not subject to unforeseen external factors.63 Similarly, BNP believes that in cross-border scenarios, efficient multinational CBDCs rely on common rules and regulatory mechanisms.64 It follows that in order to balance risks and benefits, harmonised mechanisms need to be constructed on issues that have a material impact on the transaction.

In practice, there is limited experience with retail CBDC regulatory standards. Central bank supervision is influenced by policy choices. The extent to which national banks can tolerate the transfer of credit risk from traditional commercial banks determines the degree of central bank intervention in supervision with respect to customers and service providers.65 The level of tolerance of national banks is linked to competition policy. To address this issue, Swift and the consulting firm worked on a model for CBDC interoperability, and in the second phase, the firm developed solutions to enhance security and combat fraud using digital identities and know-your-customer through the application of core payment system requirements, as well as data integrity and transparency issues. For competition policy reasons, the model addresses some of the regulatory concerns under the established cross-border payment processes by increasing the interoperability and integration of domestic infrastructure.66 This suggests that in developing strategies, the impact and importance of various factors on regulation need to be weighed together and considered as a whole to examine response ideas. While focusing on data security and privacy, it is essential to consider the policies and risks as well as the possible outcomes of implementation. Besides, other factors need to be considered in terms of the level of integration. For example, as regulatory compliance standards and data formats vary greatly from country to country. Some standards are too simple, while others are detailed and complex, adding to the challenge of translating foreign language documents in other countries. This can increase the design cost of the programme. Due to time and cost considerations, some countries may delay or reject transactions.67 It is therefore necessary to seek the views of countries on the harmonisation of regulatory standards. A more effective approach would be for some countries to propose detailed standards based on a consensus reached among the countries on important issues. The central bank can then adopt these standards at its discretion after joint deliberation. When it comes to the conflict between consensus and competition, the main concern is how to build trust among countries. Informal organisations such as the BIS can negotiate with informal groups at the regional and variable levels to understand that countries’ true intentions are to cooperate rather than compete, thus building trust and reducing uncertainty in countries’ choice of partners.68 Co-operative regulation by States can also contribute to improved governance capacity.69 However, there are still several governance issues that need to be addressed.

In terms of governance arrangements, the Dunbar project emphasises the issue of fairness in governance structures. Countries should apply the same policies and rules on a common CBDC platform. Therefore, it is essential to design governance structures and decision-making powers that can be applied uniformly to different stakeholders to ensure the fairness of collective decision-making. However, CBDC’s sharing of critical infrastructure with other central banks poses a national security issue in terms of governance, which has not yet been resolved.70 It is crucial for participants to take protective measures when sharing national security-related information. The relevant authorities should formulate a clear governance framework that sets out the responsibilities of the participants. It is also recommended to set up an independent security audit organisation can help identify potential risks in the infrastructure sharing process in a timely manner and prevent and respond to security threats more efficiently. Additionally, it has been proposed that multi-CBDC agreements could be reached between central banks of various countries to facilitate cross-border trading capabilities.71 By signing an agreement on a common understanding of governance, participating countries can establish an information-sharing mechanism. This can help implement the agreement at the international level more effectively, ensuring the interoperability of the CBDC system.

The increasing importance of cryptocurrencies in a number of sectors could result in government control over the entire cryptocurrency market being compromised. From a governance perspective, the introduction of a CBDC combined with blockchain technology could reduce governance risks. Blockchain technology would provide a transparent regulatory environment, thus strengthening the trust of counterparties. Public and private bonds could be linked to specific purposes, which would enhance governance benefits to some extent. However, these governance benefits have not yet been proven in practice.72 Thus, some experimentation is needed to verify the compliance of adding blockchain technology to cryptocurrency and CBDC applications.Currently, there is no defined solution to the tension between the decentralised institutions of the CBDC network and the governance requirements of the CBDC mechanism and the digital identity framework. Governance challenges include technical standards, interoperability, and potential risks in CBDC issuance and operation.73 To avoid potential problems, it is necessary to prepare legislative amendments in advance and clarify the extent to which the rules of the law are lenient towards foreign CBDCs.74 This requires the regulators to establish mechanisms to anticipate technological risks and prevent emergencies from occurring without an appropriate legal basis. The Central Bank has clarified some specific issues in terms of broader rights of action and remedies to protect the relevant rights.75

3. Future Development Prospects

Overall, the CBDCs present opportunities as well as legal and regulatory challenges internationally. Going forward, the introduction of CBDCs will create a more challenging environment for the application and regulation of cryptocurrencies in cross-border transactions as cryptocurrency technology continues to escalate and market pressures increase. This is because many countries are still cautious about CBDCs, and some central banks have not implemented their own digital currencies. There are still many issues that need to be resolved to implement and regulate CBDC in cross-border transactions, and countries need to spend a lot of time exploring and practising it so as not to trigger unnecessary financial chaos and social backlash. Therefore, the likely applications of cryptocurrencies and traditional currencies are much broader for a long time to come.76 However, it remains to be seen whether CBDC will develop in parallel with the private market or replace it altogether.77 This requires a judgement to be made in the light of practice and after weighing the roles and impacts of these two models in cross-border transactions.

At present, most CBDC projects around the world are still at the research stage, but some countries have made progress in their experiments. Countries can learn from each other’s workable experiences and actively test and improve them. CBDCs may form one or more networks in global cross-border transactions, which may be decentralised and uncoordinated, thus posing a variety of challenges for the policy and regulation of the international financial system. Stakeholders, such as international organisations, need to assist participating countries in removing obstacles to international cooperation and provide technical assistance where necessary.78 Countries should actively participate in CBDC-related research and pilot projects. Innovation in the system will be promoted by combining theory and practice.

On the legal front, monetary sovereignty, and the harmonisation of policies among national jurisdictions must be ensured first. When constructing their own CBDC rule of law system, countries should give full consideration to the legal attributes of CBDC and how the legal framework is structured to interface with existing laws. After that, it is important to consider the compatibility and impact of foreign and domestic CBDCs and traditional currency systems. Relevant rules and regulations need to be formulated in such a way as to anticipate possible future problems in advance and to be prepared for changes in legislation. Since country policies can change at any time, they must be closely monitored and adjusted accordingly. In the management of legal issues, “common working rules” should be developed wherever possible to minimise risks.79 Additionally, barriers to CBDCs cross-border interoperability need to be addressed from a legal risk perspective. A risk assessment structure could be designed to determine the level of risk and how to avoid it.80 Risks can be ranked, and different policies and response programmes can be designed accordingly.

On the regulatory front, regulatory competition caused by CBDCs must be avoided. Competition between private financial institutions and CBDCs may further exacerbate regulatory risks by unreasonably lowering regulatory standards in order to attract international users and gain their trust. The BIS should actively promote the harmonisation of regulatory standards so that regulation achieves optimal governance in a cooperative and competitive environment.81 Both regulation and governance need to consider the role of cooperation in overcoming the challenges of the CBDC cross-border payment system. Countries should actively cooperate in law enforcement and build specialised big data platforms to facilitate the sharing of resources. Visualization of the interface is essential to ensure transparency of information. However, confidential information relating to national security is provided at the option of the State. Meanwhile, the regulators need to monitor data to prevent system vulnerabilities. DLT and blockchain technologies have shown great potential in revolutionizing the cross-border management of CBDCs and cryptocurrency. However, there are still some technical bottlenecks in the implementation of these technologies, particularly in terms of transaction privacy and some other cross-border payment scenarios. Incorporating artificial intelligence could be a way to overcome these challenges and improve the accuracy and efficiency of these systems to some extent, while also reduce regulatory difficulties. On some important issues involving State interests and transaction risks, trading countries should set uniform but flexible regulatory standards. Such an approach could enhance the efficiency of international exchanges while safeguarding the monetary sovereignty of countries from infringement.

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3 Ibid 1308.

4 Arul Kurian, ‘The Case for Harmonising Central Bank Digital Currencies for Cross-Border

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5 Ibid 6-7.

6 Themistocleous (n2) 1309.

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8 Skylar Brooks, ‘Revisiting the Monetary Sovereignty Rationale for CBDCs’ (2021) IDEAS Working

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9 Ibid 17.

10 Jiemeng Yang and Guangyou Zhou, ‘A study on the influence mechanism of CBDC on monetary policy: An analysis based on e-CNY’ (2022) 17(7) Plos one 4.

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12 Brooks (n8) 15.

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17 Brooks (n8) 15.

18 Ibid 18.

19 Ibid 19.

20 Kurian (n4) 15.

21 Walker (n15) 3.

22 Horváth (n11) 551-552.

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28 Inozemtsev, M.I. and Nektov, A.V., Digital Platforms for Cross-Border Settlement of CBDC (The

Platform Economy, 2022) 138.

29 Ginneken, C.L. van, ‘Settlement of Cross-border Transactions through Central Bank Digital Currency (CBDC): Analysis from a Risk Management Perspective’ (2019) Industrial Engineering and

Management MSc 31.

30 Ibid 12.

31 Ryan Bowler et al, ‘A Non-Custodial Wallet for CBDC: Design Challenges and Opportunities’ (2023)

ArXiv.Org 9.

32 Inozemtsev and Nektov (n28) 136-137.

33 Girasa (n25) 330.

34 Bowler (n31) 23.

35 Inozemtsev and Nektov (n28) 138.

36 Kurian (n4)16.

37 Girasa (n25) 332.

38 Themistocleous (n2) 1312.

39 Inozemtsev and Nektov (n28) 141.

40 Ibid 142.

41 Bowler (n31) 8.

42 Girasa (n25) 315-316.

43 Ibid 325-326.

44 Ibid 329-330.

45 Foster (n23) 7.

46 Jiemeng Yang and Guangyou Zhou (n10) 5.

47 Inozemtsev and Nektov (n28) 142.

48 Walker (n15) 10.

49 Girasa (n25) 327-328.

50 Joseph Huber, CBDC System Design Principles (Springer, 2023)122.

51 Bowler (n31) 9.

52 Laboure (n1) 663.

53 Jiemeng Yang and Guangyou Zhou (n10) 4.

54 Mikhail Vitalyevich Leonov, ‘MONETARY POLICY AND BANKING INTERMEDIATION IN

CBDC ECONOMY’ (2022) 13(4) Independent Journal of Management & Production 459.

55 Walker (n15) 5.

56 Ibid6.

57 Heng Wang and Simin Gao, ‘The future of the international financial system: The emerging CBDC

network and its impact on regulation’ (2023) Regulation & Governance 7.

58 Ibid 4.

59 Ibid 12.

60 Ibid 15.

61 Ibid 10-11.

62 Girasa (n25) 325.

63 Foster (n23) 23.

64 Kulms (n16) 555.

65 Ibid 561.

66 Themistocleous (n2) 1309.

67 Kurian (n4) 5.

68 Wang and Gao (n57) 11.

69 Ibid 15.

70 Themistocleous (n2) 1311-1312.

71 Vu Minh Ngo et al, ‘Governance and monetary policy impacts on public acceptance of CBDC adoption’

(2023) Research in International Business and Finance 10.

72 Laboure (n1) 673.

73 Wang and Gao (n57) 14.

74 Ibid 15.

75 Walker (n15) 11.

76 Laboure (n1) 673.

77 Themistocleous (n2) 1313.

78 Laboure (n1) 15.

79 Ibid.

80 Themistocleous (n2) 1313.

81 Laboure (n1) 15.

BIBLIOGRAPHY

A Articles/ Books/ Reports

Arul Kurian, ‘The Case for Harmonising Central Bank Digital Currencies for Cross-Border Transactions’ (2023) OBSERVER RESEARCH FOUNDATION

François Gianviti, Monetary and Financial Law (International Monetary Fund, 2008) vol 4

G.A. Walker, ‘Digital Money & Central Bank Digital Currency (CBDC) - New Opportunity, New Challenge’ (2022) 55(3) The International Lawyer

Gábor Horváth, ‘Monetary Sovereignty and Central Bank Digital Currency’ (2022) 67(4) PÉNZÜGYI SZEMLE/PUBLIC FINANCE QUARTERLY 539

Ginneken and C.L. van, ‘Settlement of Cross-border Transactions through Central Bank Digital Currency (CBDC): Analysis from a Risk Management Perspective’ (2019) Industrial Engineering and Management MSc

Heng Wang and Simin Gao, ‘The future of the international financial system: The emerging CBDC network and its impact on regulation’ (2023) Regulation & Governance

Inozemtsev, M.I. and Nektov, A.V., Digital Platforms for Cross-Border Settlement of CBDC (The Platform Economy,2022)Jiemeng Yang and Guangyou Zhou, ‘A study on the influence mechanism of CBDCon monetary policy: An analysis based on e-CNY’ (2022) 17(7) Plos one

Joseph Huber, CBDC System Design Principles (Springer, 2023)

Katherine Foster, Sofie Blakstad, Sangita Gazi and Martijn Bos, ‘Digital currencies and CBDC impacts on least developed countries (LDCs)’ (2021) The Dialogue on Global Digital Finance Governance Paper Series

Marion Laboure, Markus H.-P. Müller, Gerit Heinz, Sagar Singh and Stefan Köhling,‘Cryptocurrencies and CBDC: The Route Ahead’ (2021) 12(5) Global Policy

Marinos Themistocleous, ‘Towards cross-border CBDC interoperability: insights from a multivocal literature review’ (2023) 35(5) Journal of Enterprise Information Management 5

Mikhail Vitalyevich Leonov, ‘MONETARY POLICY AND BANKING

INTERMEDIATION IN CBDC ECONOMY’ (2022) 13(4) Independent Journal of Management & Production Rainer Kulms, ‘The Private (Law) Side of CBDCs’ (2023) 39(3) Banking & Finance Law Review 547

Rosario Girasa, Regulation of Cryptocurrencies and Blockchain Technologies: National and International Perspectives (Springer International Publishing AG, 2nd ed, 2022)

Ryan Bowler, Geoffrey Goodell, Joe Revans, Gabriel Bizama and Chris Speed, ‘A Non-Custodial Wallet for CBDC: Design Challenges and Opportunities’ (2023) ArXiv.OrgSkylar Brooks, ‘Revisiting the Monetary Sovereignty Rationale for CBDCs’(2021) IDEAS Working Paper Series

Vu Minh Ngo, Phuc Van Nguyen, Huan Huu Nguyen, Huong Xuan Thi Tram and Long Cuu Hoang, ‘Governance and monetary policy impacts on public acceptance of CBDC

adoption’ (2023) Research in International Business and Finance

B Website

Antonio Diez de los Rios and Yu Zhu, ‘Staff Analytical Note’, CBDC and Monetary Sovereignty (Note, 2020) < https://www.bankofcanada.ca/2020/02/staff-analytical-note-2020-5/>

关于光明涉外

上海市光明律师事务所创建于 1996 年，伴随着中国律师业的发展不断壮大起来，在南京、苏州、宁波等地设有办公室，先后荣膺首届“全国优秀律师事务所”“上海市优秀律师事务所”等殊荣，并连续16 年获评“上海市文明单位”，以及获得亚洲法律杂志（ALB）、商法（China Business Law Journal）等国际法律评级机构的推荐及奖项。

涉外法律服务作为作为律所的核心业务领域之一，服务团队由美、英、德、韩、日、西、法等国留学或访学归来和曾在国际律所执业的涉外法律服务经验丰富的律师组成，秉承“用心、专注”的服务理念，从专业化和国际化角度为客户提供各项法律服务。律师能够熟练运用英语、德语、韩语、日语、俄语、法语等多种语言为客户提供多地区、多法域的全流程法律服务。团队汇集了跨境投融资、国际商事争议解决等多个领域的专家，通过与多家国际知名律师事务所长期、稳定的合作关系，为国内外客户提供了一站式法律解决方案。

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