Most people use money—the cash in their wallets or deposits in a bank account—more or less every day. But there is little widespread understanding of what rights attach to money. An apocryphal story has it that Henry Ford once remarked in the 1930s that if people knew how banks created private money through deposits, “there’d be a revolution before tomorrow morning.” As for cash, economist John Exter famously referred to this form of public money as an “IOU nothing” from the State. While these legal and monetary details—once fleshed out—might be startling to many, they are practically unimportant so long as the public’s settled expectations about the use and enjoyment of their money are met.
By 2023, nearly every central bank around the world will have considered whether to create a new form of money, eponymously named “central bank digital currency” or “CBDC.” A simplified characterization of CBDC is as the economic equivalent of digital cash—but, as it has been explained to the public, much better. Central banks have promoted CBDC as a currency “superhero”: more stable than the volatile cryptocurrencies proliferating in the private sector, safer than a bank deposit, and (like crypto) more efficient than existing currency. For these reasons, some central bankers advertise CBDC as rights-enhancing—“giving people control over their money.” But is this an accurate account of CBDC? To date, scholarly and policy studies of CBDC have centered around their underlying economic implications and rationales, financial stability implications, and technological feasibility.
Little attention has been paid to what legal rights attach to CBDC as a new form of public money. This Article is the first to do so. And unpacking the distinctive rights and liabilities associated with a U.S.-dollar CBDC is, as this Article will argue, essential to answering whether the Federal Reserve—America’s central bank—should move forward with creating digital public money.