Rainer Kulms is an affiliate of the US law department of the Max Planck Institute of Private International and Comparative Law, Lecturer-in-Law at Hamburg University, Germany, Fellow of the European Law Institute and Editor-in-Chief of the European Business Organization Law Review. He graduated from Hamburg University (Dr. iuris and Postgraduate Degree of Habilitation), obtained an LL.M. from the University of Michigan, Ann Arbor, and was Visiting Fellow at the University of Cambridge (Wolfson College). After several years in industry he has taught at the universities of Hamburg, Belgrade, Calcutta, Cluj, Jinan, Paris XI, Prague, Sarajevo, Taipei, Tirana, Timisoara and Xi’an and at the China University of Political Science and Law, Beijing, Hong Kong University, City University of Hong Kong and the China-EU School of Law. He has published books and various articles in his field of research (German, European and US Corporate and Commercial Laws, and the law and economics of related regulatory issues) and co-authored books on mediation law, US class actions and private law in Eastern Europe.
The Private (Law) Side of CBDCs
Abstract:
Crypto-values have embarked on a trajectory from private virtual currencies to crypto-assets with property-like status. Projects for central bank digital currencies (CBDCs) add an important private law twist to the digitalisation of finance. Functionally, they resemble commercial bank money. But their proprietary nature redefines the status of users and financial service providers, which manage digital money holdings. In this, distributed ledger technology plays a prominent role in channelling CBDC units into the market and providing the backbone for CBDC-based transactions.
In exploring the private law side of central bank digital currencies, this paper will build on a typology of wholesale and retail CBDC projects in order to identify major challenges to established private law concepts. Under both, account-based and token-based models for retail-CBDCs, reification of claims against the issuing central bank is a precondition for preserving the currency function of digital public money. Although CBDCs differ from private, virtual currencies, the developing case law on digital assets retains it argumentative value for paving the CBDCs’ way into private law. After locating CBDC tokens in private law, the paper will expose CBDCs to real world challenges by focusing on payment scenarios (including the execution of judgment for payment in CBDC units), misappropriation cases and the fiduciary relationship between the owner of digital money and the provider of digital wallet services. Repercussions from cross-country, multi-CBDC projects will be explored. A final section will assess to what extent data protection law may impact on central banks and wallet service providers as the handle information on CBDC ownership, before the case for legislative or regulatory intervention is argued.