Law of central bank digital currency for monetary discipline

Law is key to the governance of central bank digital currency (CBDC) for monetary discipline. The digitalisation of money is transforming central banks' management of money supply and distribution, allowing them to carry out more complex monetary and fiscal functions. CBDC enables more granular control over money creation and distribution, providing new fiscal stimulus and government transfer tools. However, this expansive central bank power risks fiscal dominance, government overreach in the economy, inflationary pressure, and wealth redistribution impact. This article argues that discretionary central banking should be adjusted to establish more sophisticated monetary institutions with clearer rules on central bank money creation. In the digital age, financial democracy should emphasise more transparency and public participation, as digitalisation can exacerbate information asymmetry and black-box decision-making. To enhance central bank monetary discipline, law is needed to define the scope of such money creation power, the issuance standard, quality and quantity limits, and transparency of money supply.