Alternative digital currencies in international monetary law: Global stablecoins

Abstract

Alternative digital currencies were created to correct the shortcomings of the so-called first generation of cryptocurrencies. Their impact on the monetary order stability, systemic risk, and monetary policy strategy pursued by the Central Bank has been insufficiently examined, primarily because they are issued by large technology companies rather than the Central Bank as the custodian of monetary sovereignty. The treatment of cryptocurrencies in tort law is different from the monetary law standpoint. As such, the former is not considered in this paper because it is a private law relationship. On the other hand, monetary law refers to public law relations, including the regulatory powers of the Central Bank and the legal definition of alternative money by the provisions of the Central Bank law. As the supreme monetary institution, the Central Bank has a monopoly over the legal tender for designating and issuing money. In that sense, it would be useful to deal with the place and importance of alternative money in monetary law first, and then with other branches of private and public law. In legal terms, the acceptance and circulation of alternative money impose simultaneous (and highly demanding) consideration of the legal nature of cryptocurrency, where we can see the primacy of the social theory of money over state monetary nominalism. However, this primacy must be only temporary because the historical development of money (in all its forms) clearly shows that the emergence of any currency must sooner or later be regulated by adequate laws, for the sake of legal security and preservation of monetary stability. In a way, the accelerated technical-technological development has "caused" the existing status quo in the classical and (to some extent) the contemporary monetary law thought about how money is legally defined and who can take the role of money issuer, which has shaken the centuries-old awareness of the nature and functions of money in modern society. The circumstances that have influenced the reconsideration of already acquired habits include the emergence of reduced use of cash in circulation, the emergence of "sharing" technology that enabled the creation of cryptocurrencies, the announcement of leading technology and other multinational companies on issuing private cryptocurrencies, as well as the circumstances related to the global economic and financial crisis and the Covid-19 pandemic which point to certain advantages of alternative money.