CBDC Navigator

134 reports and articles — a curated library of resources on Central Bank Digital Currency

Since 2014, academic and policy research on Central bank digital currencies (CBDC) have surged, as have technical experiments. Recently, many central banks are actively evaluating CBDC, spanning continents and economies both large and small, developed and emerging.

The motivation of CBDC varies from country to country, and its relevance and potential for value creation are also different. Research and experiments conducted by central banks and academic researchers have already shown that the value of CBDC can be evaluated differently after considering costs and risks. Central bank digital currencies, being both a young and deep-rooted concept of the global financial system, can spark a new leap in technological and financial development of both national payment systems and the economy of many countries as a whole.

However, like everything young and uncertain, the introduction of CBDCs does raise a lot of controversial questions. We are on the verge of innovation, many aspects of which have yet to be conceptualized, invented and implemented.

Below you will find a list of reports and articles related to the topic of CBDC.

Ruslan Yusufov
Managing Partner



Asian Development Bank Institute, Bank for International Settlements, International Monetary Fund


Banco Central del Uruguay, Banco de Portugal, Bank of Canada, Bank of England, Banco de España, Bank of Finland, Bank Indonesia, Bank of Japan, Bank of Korea, Banque de France, Narodowy Bank Polski, People’s Bank of China, Reserve Bank of Australia, Federal Reserve Bank of Kansas City, Reserve Bank of New Zealand, Federal Reserve Bank of Philadelphia, Federal Reserve Bank of St. Louis, US Federal Reserve System, Sveriges Riksbank.


US National Bureau of Economic Research, UK Centre for Economic Policy Research, Becker Friedman Institute for Research in Economics, Chinese Academy Of Sciences, Sloan School of Management, Ross School of Business, Warwick Business School, Copenhagen Business School, Norwegian School of Economics, University of Mazandaran, University of Johannesburg, Bocconi University, King Abdulaziz University, University Of Manouba, University Of Ez-Zitouna, Nanjing University, Rutgers University, Jönköping University, blockchain company R3, PWC, and others.


Authors study the optimal design of a central bank digital currency (CBDC) in an environment where agents sort into cash, CBDC and bank deposits according to their preferences over anonymity and security; and where network effects make the convenience of payment instruments dependent on the number of their users. CBDC can be designed with attributes similar to cash or deposits, and can be interest-bearing: a CBDC that closely competes with deposits depresses bank credit and output, while a cash-like CBDC may lead to the disappearance of cash. Then, the optimal CBDC design trades off bank intermediation against the social value of maintaining diverse payment instruments. When network effects matter, an interest-bearing CBDC alleviates the central bank’s tradeoff.

Various central banks are actively considering forms of digital currency. This note centers on the form that comes closest a digital equivalent of cash, and summarizes the main pros and cons involved in introducing it. Key sets of considerations are: 1) the extent of anonymity of the digital currency, and the associated tradeoff between limiting illicit activity and containing the growth of private cryptocurrencies; 2) monetary control and the downward extension of the Effective Lower Bound; 3) financial disintermediation risks.

One fundamental takeaway from the book is that regulators are going to look hard at the extent to which new digital assets bring genuine new functionality that is useful to consumers but not simply an end-run around existing regulations on financial assets. Another is that the introduction of retail central bank currencies is likely to come gradually in stages, as officials want to be sure that there is a balanced development of fintech that creates opportunities for new financial intermediation and not just new transactions media.

Central bank digital currencies (CBDCs) promise to provide cash-like safety and convenience for peer-to-peer payments. To do so, they must be resilient and accessible. They should also safeguard the user’s privacy, while allowing for effective law enforcement. Different technical designs satisfy these attributes to varying degrees, depending on whether they feature intermediaries, a conventional or distributed infrastructure, account- or token-based access, and retail interlinkages across borders. We set out the underlying trade-offs and the related hierarchy of design choices.

Authors investigate the economic and institutional drivers of CBDC development and take stock of design efforts. Authors set out a comprehensive database of technical approaches and policy stances on issuance, relying on central bank speeches and technical reports. Most projects are found in digitised economies with a high capacity for innovation. Work on retail CBDCs is more advanced where the informal economy is larger. Authors next take stock of the technical design options. More and more central banks are considering retail CBDC architectures in which the CBDC is a direct cash-like claim on the central bank, but where the private sector handles all customer-facing activity. Authors conclude with an in-depth description of three distinct CBDC approaches by the central banks of China, Sweden and Canada.

A survey of central banks shows that a majority are collaboratively looking at the implications of a central bank digital currency. Although many have reached the stage of considering practical issues, central banks appear to be proceeding cautiously and few report plans to issue a digital currency in the short or medium term.

New cryptocurrencies are emerging almost daily, and many interested parties are wondering whether central banks should issue their own versions. But what might central bank cryptocurrencies (CBCCs) look like and would they be useful? This feature provides a taxonomy of money that identifies two types of CBCC – retail and wholesale – and differentiates them from other forms of central bank money such as cash and reserves. It discusses the different characteristics of CBCCs and compares them with existing payment options.

Most central banks are exploring central bank digital currencies (CBDCs), and their work continues apace amid the Covid-19 pandemic. As a whole, central banks are moving into more advanced stages of CBDC engagement, progressing from conceptual research to practical experimentation. Around the globe, interest in CBDCs continues to be shaped by local circumstances. In emerging market and developing economies, where central banks report relatively stronger motivations, financial inclusion and payments efficiency objectives drive general purpose CBDC work. A testament to these motives is the launch of a first “live” CBDC in the Bahamas. This front-runner is likely to be joined by others: central banks collectively representing a fifth of the world’s population are likely to issue a general purpose CBDC in the next three years. However, the majority of central banks remains unlikely to issue CBDC in the foreseeable future.

Our survey shows that central banks are undertaking extensive work on central bank digital currencies. Globally, emerging market economies are moving from conceptual research to intensive practical development, driven by stronger motivations than those of advanced economy central banks. Central banks representing a fifth of the world’s population say they are likely to issue the first CBDCs in the next few years.

This paper analyzes the legal foundations of central bank digital currency (CBDC) under central bank and monetary law. Absent strong legal foundations, the issuance of CBDC poses legal, financial and reputational risks for central banks. While the appropriate design of the legal framework will up to a degree depend on the design features of the CBDC, some general conclusions can be made. First, most central bank laws do not currently authorize the issuance of CBDC to the general public. Second, from a monetary law perspective, it is not evident that “currency” status can be attributed to CBDC. While the central bank law issue can be solved through rather straithforward law reform, the monetary law issue poses fundmental legal policy challenges.

This joint report by the Committee on Payments and Market Infrastructures and the Markets Committee provides an initial analysis of CBDCs. It offers a high-level overview of their implications for payments, monetary policy and financial stability. The analysis of the committees reflects initial thinking in this rapidly evolving area and is a starting point for further discussion and research. It also highlights that the issuance of a CBDC requires careful consideration.

This paper sheds light on Australia’s fast real-time retail payments system, the New Payments Platform (NPP), which was launched in February 2018 by a consortium of 13 financial institutions, including the Reserve Bank of Australia (RBA). The NPP operates on a 24/7 basis and allows financial institutions to provide immediate funds availability to payment recipients, even where payers and payees have accounts with different financial institutions. This study highlights that there is no strong case for the RBA to issue a retail central bank digital currency given that the safer Next Generation Banknote series is available and the safer NPP, for which the deposits are projected by the Financial Sector Claims Scheme, is installed.

To support the understanding that banks’ debt issuance means money creation, while centralized nonbank financial institutions’ and decentralized bond market intermediary lending does not, the paper aims to convey two related points: First, the notion of money creation as a result of banks’ loan creation is compatible with the notion of liquid funding needs in a multi-bank system, in which liquid fund (reserve) transfers across banks happen naturally. Second, interest rate-based monetary policy has a bearing on macroeconomic dynamics precisely due to that multi-bank structure. It would lose its impact in the hypothetical case that only one (“singular”) commercial bank would exist. Authors link their discussion to the emergence and design of central bank digital currencies (CBDC), with a special focus on how loans would be granted in a CBDC world.

Rapid ongoing progress with digital technologies has increased the prospects for adoption of new forms of digital money for both domestic and international transactions. These include central bank digital currencies (CBDCs) and the so-called global stable coins (GSCs) proposed by large technological companies or platforms. This paper explores the complex interactions between the incentives to adopt and use CBDCs and GSCs across borders and discusses the potential macro-financial effects.

Fiat currency implemented as a blockchain can enable multiple benefits such as reduced cost compared to expensive handling of cash and better transparency for increased public trust. However, such deployments have conflicting requirements including fast payments, strong user privacy and regulatory oversight. None of the existing blockchain transaction techniques supports all of these three requirements. In this paper authors design a new blockchain currency, called PRCash, that addresses the above challenge. The primary technical contribution of this work is a novel regulation mechanism for transactions that use cryptographic commitments. Authors enable regulation of spending limits using zero-knowledge proofs. PRCash is the first blockchain currency that provides fast payments, good level of user privacy and regulatory control at the same time.

Innovations in digital payment technologies and digital currencies suggest that extending access to central bank money (CBM) to firms and individuals is now feasible. This paper focuses on a recent related debate regarding alternative organizational models for the payment system and their implications for the banking industry. One of the main conclusions is that extended access to CBM will likely create a centrifuge force in the financial system that might result in the unbundling of the banking functions.

The level and trend in cash use in a country will influence the demand for central bank digital currency (CBDC). While access to digital currency will be more convenient than traveling to an ATM, it only makes CBDC like a bank debit card—not better. Demand for digital currency will thus be weak in countries where cash use is already very low, due to a preference for cash substitutes (cards, electronic money, mobile phone payments). Where cash use is very high, demand should be stronger, due to a lack of cash substitutes. As the demand for CBDC is tied to the current level of cash use, we estimate the level and trend in cash use for 11 countries using four different measures. A tentative forecast of cash use is also made. After showing that declining cash use is largely associated with demographic change, we tie the level of cash use to the likely demand for CBDC in different countries. In this process, we suggest that one measure of cash use is more useful than the others. If cash is important for monetary policy, payment instrument competition, or as an alternative payment instrument in the event of operational problems with privately supplied payment methods, the introduction of CBDC may best be introduced before cash substitutes become so ubiquitous that the viability of CBDC could be in doubt.

This paper examines key considerations around central bank digital currency (CBDC) for use by the general public, based on a comprehensive review of recent research, central bank experiments, and ongoing discussions among stakeholders. It looks at the reasons why central banks are exploring retail CBDC issuance, policy and design considerations; legal, governance and regulatory perspectives; plus cybersecurity and other risk considerations. This paper makes a contribution to the CBDC literature by suggesting a structured framework to organize discussions on whether or not to issue CBDC, with an operational focus and a project management perspective.

In this study, authors describe the fintech and cryptoassets-related trends in the Republic of Korea and review the measures and assessments of the Government of the Republic of Korea and the Bank of Korea. Authors also provide discussion on central bank digital currency. Fintech in the Republic of Korea still accounts for only a small share of payment and settlement services, but it can induce changes in the financial industry. It is, however, unlikely that cryptoassets will become widely used and accepted in the near future, and the Bank of Korea is taking a cautious stance on central bank digital currency.

This discussion note proposes a conceptual framework to assess the case for CBDC adoption from the perspective of users and central banks. It abstracts from cross-border considerations by assuming that CBDC is for domestic use only. This note discusses possible CBDC designs, and explores potential benefits and costs, with a focus on the impact on monetary policy, financial stability, and integrity. This note also surveys research and pilot studies on CBDC by central banks around the world.

This paper takes an overview of the concepts and features of central bank money and private sector money and focuses on the actual performance of these types of money in selected advanced and emerging economies. Their actual performance was also examined by focusing on selected advanced economies and emerging economies. So far, central bank money has been sufficiently provided. Private sector money (mainly bank deposits) are growing and much greater than central bank money. Meanwhile, digital coins, such as bitcoin, can be considered as newly emerged private sector money. Meanwhile, some central banks have examined the potential application of DLT and issued their own digital coins to the general public or financial institutions under the so-called “central bank digital currency” proposals. However, no central banks so far have found strong advantages of issuing their own digital coins at this stage because of several technical constraints. Given that technology has been progressing fast in the settlement and payment areas, as well as DLT, it is possible that central banks may increase their interest in retail and wholesale CBDC proposals based on DLT and consider actual implementation seriously in the near future.

Central Banks

The Riksbank has for almost two years been conducting a review into the possibility and consequences of introducing a Swedish central bank digital currency, a so-called e-krona. This third issue of Sveriges Riksbank Economic Review in 2018 is a special theme issue discussing the e-krona from different perspectives. The analyses have studied the consequences of a potential e-krona from different points of view. What is the role of the central bank in the payments market? How much demand for an e-krona might there be? What consequences will this have for the banks? How will interest-rate setting be affected, and what further effects might the e-krona have for monetary policy and economic developments in the long run?

Author investigates how an interest-bearing central bank digital currency (CBDC) can be expected to impact a monopolistic banking sector. The proposed framework of analysis combines the Diamond (1965) model of government debt with the Klein (1971) and Monti (1972) model of a monopoly bank. Author argues that the introduction of a CBDC has no detrimental effect on bank lending activity and may, in some circumstances, even serve to promote it. The intervention does, however, reduce monopoly bank profit since it induces the monopoly bank to raise its deposit rate to retain deposits that remain a relatively cheap source of funding. More attractive deposit services have the effect of increasing financial inclusion and decreasing the demand for currency. Available theory and evidence suggests that a properly-designed CBDC is not likely to threaten financial stability.

In this paper authors assume that wide adoption of a digital currency denominated in a different unit of account, such as Libra, presents a significant threat to monetary sovereignty and financial stability. Issuing a CBDC could potentially counter this threat. Making central bank money more user-friendly would increase its attractiveness as a means of payment in general and as an alternative to Libra in particular.

Authors study the macroeconomic consequences of issuing central bank digital currency (CBDC) — a universally accessible and interest-bearing central bank liability, implemented via distributed ledgers, that competes with bank deposits as medium of exchange. In a DSGE model calibrated to match the pre-crisis United States, we find that CBDC issuance of 30% of GDP, against government bonds, could permanently raise GDP by as much as 3%, due to reductions in real interest rates, distortionary taxes, and monetary transaction costs. Countercyclical CBDC price or quantity rules, as a second monetary policy instrument, could substantially improve the central bank’s ability to stabilise the business cycle.

A speech delivered to The Point Conference in Auckland on 26 June 2018 by Geoff Bascand, Deputy Governor. “Currently, it is too early to determine whether a digital currency should be issued. Central banks and researchers are still probing these technologies and currencies. But we will continue to explore digital currencies; for our benefit and for the benefit of New Zealand’s financial system.”

Rapid digitalisation of payments leads to greater cost and time efficiency, yet could also potentially trigger legal and security challenges as well as lead to weakening of financial stability and less effective monetary policy transmission. In order to ensure greater safety, central banks are contemplating and testing solutions thanks to which public using payment innovations could transact in funds that are ultimately backed by central bank. One of these solutions is central bank digital currency, a digital version of cash. The proposed versions of central bank digital currency are very diverse. Depending on the version assumed by a particular central bank, central bank digital currency can have an impact on central bank interest rate setting, monetary policy implementation and transmission mechanism. This relates most notably to effective lower bound which could either rise or fall, conditional on design on central bank digital currently.

Authors characterize various currencies according to their control structure, focusing on cryptocurrencies such as Bitcoin and government-issued fiat money. They then argue that there is a large unmet demand for a liquid asset that allows households and firms to save outside of the private financial sector. Central banks could offer such an asset by simply allowing households and firms to open accounts with them. Finally, authors conclude that a central bank will not issue cryptocurrencies in the sense of a truly decentralized and permissionless asset that allows users to remain anonymous.

A digital currency issued by the Banco Central del Uruguay (BCU), called e-Peso, circulates in Uruguay between November 2017 and April 2018. The digital issuance of this legal tender currency was done in the controlled framework of a pilot plan. The objectives of this experience were to test technological aspects of the ePeso system and to learn about central banks digital currencies (CBDC). In this article authors describe reasons behind the experiment, key features of the ePeso system, lessons learned and further questions.

This paper builds a model with imperfect competition in the banking sector. In the model, banks issue deposits and make loans, and deposits can be used as payment instruments by households. Authors use the model to assess the general equilibrium effects of introducing a central bank digital currency (CBDC). We identify a new channel through which the CBDC can improve the efficiency of bank intermediation and increase lending and aggregate output even if its usage is low, thus limiting banks’ market power in the deposit market.The model is calibrated to the US economy.

One frequently raised concern about a central bank digital currency (CBDC) is that it is likely to compete with bank deposits as a means of payment and therefore increase private banks’ funding costs and induce disintermediation. We develop a micro-founded general equilibrium model with money and banking to evaluate this concern both theoretically and quantitatively. We find that when banks have market powers in the deposit market, introducing a CBDC that competes with bank deposits as a means of payment can compel banks to raise the deposit rate and expand bank intermediation and output. The model calibrated to the U.S. economy suggests that a CBDC with a proper interest rate can raise bank lending by 3.55% and output by 0.50%. We also use the framework to evaluate other dimensions of the CBDC design, including acceptability, eligibility as reserves and the rule of supply, and assess the role of a CBDC as the economy becomes increasingly cashless.

This document reports on the work done by an internal Banque de France central bank digital currency (CBDC) taskforce led by Christian Pfister. The taskforce’s objective was to document the benefits, costs, difficulties and risks associated with the potential implementation of a CBDC, whether on a wholesale basis, i.e. accessible to financial institutions or to designated financial institutions, or on a retail, i.e. universally accessible, basis. The group deliberately took a more operational perspective than that typically adopted in CBDC-related work, much of which has been driven by theoretical approaches. Part One of the report looks at the potential reasons for issuing a CBDC, Part Two considers technical and operational aspects, Part Three deals with the legal framework, while Part Four addresses the macroeconomic, monetary and financial consequences. Wherever appropriate, a distinction is drawn between the wholesale and retail versions of CBDC, since it is possible to dissociate issuance of one type from the other.

As of 2009, the concept of decentrally-issued digital assets which, according to their promoters, could replace legal tender, was put forward to the public. More than a decade on, this project has still not been implemented. Stablecoins, which have emerged more recently, are designed to be more like legal tender and aim to remedy the shortcomings in the first generation of crypto-assets. However, they still carry many risks. In response to these initiatives, both central banks and private operators have launched innovative projects in the field of payment infrastructure and instruments. The Banque de France in turn has begun experiments on a digital euro.

Central banks and academics are discussing the possibility of central bank issuance of a digital currency. Many arguments exist for and against issuing a CBDC. This note discusses the two most important arguments from the perspective of the monetary policy objective of price stability. In the next two sections, authors state each argument and discuss the corresponding caveats and implications for the form of a CBDC. Throughout this note, they assume that the CBDC is universally accessible, but we impose no assumptions on transaction limits.

Many central banks are contemplating whether to issue a central bank digital currency (CBDC). CBDC has certain potential benefits, including the possibility that it can bear interest. However, using CBDC is costly for agents, perhaps because they lose their anonymity when using CBDC instead of cash. I study optimal monetary policy when only cash, only CBDC, or both cash and CBDC are available to agents. If the cost of using CBDC is not too high, more efficient allocations can be implemented by using CBDC than with cash, and the first best can be achieved. Having both cash and CBDC available may result in lower welfare than in cases where only cash or only CBDC is available. The welfare gains of introducing CBDC are estimated as up to 0.64% for Canada.

Consideration of CBDC is a new challenge, which is complex and subject to significant uncertainty. A CBDC could have important consequences, which would depend on its specific attributes, and could include both benefits and costs. Accordingly, assessing CBDC requires careful analysis of motivations and potential implications, including an assessment of the risks that might arise from CBDC.

At the end of November 2017, the Governor of the Bank of Israel appointed a team to examine the issue of central bank digital currencies. This document sums up the Bank of Israel’s work, mainly providing an outline of the situation abroad and in Israel, and presents the main issues that must be examined in discussing a central bank digital currency. According to the study, the main purpose of issuing digital currency is to maintain the public’s access to a central bank’s liability in the event that the use of cash declines significantly, as is happening in Sweden, but that issue is not currently relevant to the Israeli economy, since there is no significant reduction in the use of cash. As a result, authors does not recommend that the Bank of Israel issue digital currency (e-shekel) in the near future.

This paper considers the legal impact of a central bank digital currency (CBDC) on the European payments landscape. It opens with a discussion about the concept of money, its functions and the underlying theories. The analysis then discusses the concept of CBDCs and the various types of CBDC that are currently being advanced. The paper questions whether adoption of a pan-European CBDC would require a harmonised approach, or whether national solutions alone could suffice. The paper describes the legal aspects of the European payments landscape that would need to be adjusted in order to settle CBDC transactions without posing risks to payment system participants. The paper concludes by suggesting that this new form of money could broaden the discussions surrounding the institutional theory of money, and that a more cautious approach to the subject would be more likely to incline the European legislator to consider amendments, should any decision be taken to embrace a CBDC.

Digital currencies have attracted strong interest in recent years and have the potential to become widely adopted for use in making payments. Public authorities and central banks around the world are closely monitoring developments in digital currencies and studying their implications for the economy, the financial system and central banks. One key policy question for public authorities such as a central bank is whether or not to issue its own digital currency that can be used by the general public to make payments. There are several public policy arguments for a central-bank-issued digital currency. This paper proposes a framework for assessing why a central bank should consider issuing a digital currency and how to implement it to improve the efficiency of the retail payment system.

Central banks have traditionally issued cash to the general public. With digitalisation, banknotes are becoming a technically outdated payment instrument, and some central banks have explored the possibility of central bank-issued electronic money applicable to retail payments. Electronic central bank money would offer the public the possibility to hold central bank money in a potentially cashless future. In its present form, blockchain technology would probably not be a suitable solution, since it is unable to process a sufficiently large number of transactions. Electronic central bank money would potentially have significant implications for other areas of central bank policy, which should be meticulously analysed.

This article introduces the main findings of the Report of the Study Group on Legal Issues regarding Central Bank Digital Currency (CBDC). Based on four stylized models of CBDC issuance, the Report discusses what legal issues would arise within the Japanese legal framework if the Bank of Japan were to issue its own CBDC.

In recent years, there have been rapid technological innovations in retail payments. Such dramatic changes in the economics of payment systems have led to questions regarding whether there is consumer demand for cash. The entry of these new products and services has resulted in significant improvements in the characteristics of existing methods of payment, such as tap-and-go technology or contactless credit and debit cards. In addition, the introduction of decentralized digital currencies has raised questions about whether there is a need for a central bank digital currency (CBDC) and, if so, what its essential characteristics should be. To address these questions, authors develop and estimate a structural model of demand for payment instruments. Using parameter estimates, authors conduct a counterfactual experiment of an introduction of CBDC and simulate post-introduction consumer adoption and usage decisions.

This paper focuses on studying the effects of CBDC on banks using the Swedish banking sector as an illustration. Authors find that, while a given outflow of retail deposits into e-krona reduces banks’ liquidity portfolios and worsens their funding profiles, banks can normally control this outflow via deposit rates. Banks can also issue more market funding to restore their liquidity and funding profiles. An indicative calculation of the demand for e-krona in normal times shows that it would be below three per cent of nominal GDP and that the impact of an e-krona on bank funding costs would be up to 25 basis points under plausible assumptions. In times of distress, an e-krona may increase thе number of banks experiencing a run. This will be the case if an e-krona has features that make it more attractive than existing run assets, such as deposits at the safest banks, tax accounts or cash. The exact features of an e-krona can, however, be controlled by the policy maker. In sum, authors do not find any decisive argument against the issuance of an e-krona when studying financial stability effects on banks.

An anonymous token-based central bank digital currency (CBDC) would pose certain security risks to users. These risks arise from how balances are aggregated, from their transactional use and from the competition between suppliers of aggregation solutions. The central bank could mitigate these risks in the design of the CBDC by limiting balances or transfers, modifying liability rules or imposing security protocols on storage providers.

In the Russian expert community, the topic of digital assets and their impact on the monetary system is also actively discussed. In this paper, author provide an overview of the main topics of global discussions on the issue of retail digital currencies of central banks, and highlight important aspects: 1. The emergence of new money from central banks in the form of CBDCs may reshape the financial system, but is unlikely to help solve the structural economic problems of any particular country. 2. The potential of CBDC has not yet been explored and the potential benefits are difficult to quantify. 3. The new type of money has the potential to enhance the transmission mechanism of monetary policy, but this capacity depends on the specific design of retail digital currencies of central banks. 4. The creation of retail CBDCs can bring risks, for example, to financial stability, which must be thoroughly studied beforehand. So, systems design should consider and minimize these risks.

This paper sets out three models of central bank digital currency (CBDC) that differ in the sectors that have access to CBDC. It studies sectoral balance sheet dynamics at the point of an initial CBDC introduction, and of an attempted large-scale run out of bank deposits into CBDC. We find that if the introduction of CBDC follows a set of core principles, bank funding is not necessarily reduced, credit and liquidity provision to the private sector need not contract, and the risk of a system-wide run from bank deposits to CBDC is addressed. The core principles are: (i) CBDC pays an adjustable interest rate. (ii) CBDC and reserves are distinct, and not convertible into each other. (iii) No guaranteed, on-demand convertibility of bank deposits into CBDC at commercial banks (and therefore by implication at the central bank). (iv) The central bank issues CBDC only against eligible securities (principally government securities). The final two principles imply that households and firms can freely trade bank deposits against CBDC in a private market, and that the private market can freely obtain additional CBDC from the central bank, at the posted CBDC interest rate and against eligible securities.

Can introducing Central Bank Digital Currency (CBDC) improve social welfare? Authors construct a dual currency model to study whether introducing CBDC with a recordkeeping technology can reduce tax evasion incentives in cash transactions, and further achieve a better allocation than in a cash-only economy. Tax evasion does not occur in an economy only with an inflation tax. However, if imposing a positive sales tax is inevitable for central bank independence, there arises an inefficiency associated with tax evasion in cash transactions. Introducing CBDC with positive interest can reduce this inefficiency and thus improve welfare by discouraging tax evasion, and rewarding tax payments.

This briefing selects one motivation for a CBDC—financial inclusion—and highlights three ways that a CBDC designed to address this issue may conflict with or impede other objectives for creating a CBDC. Although there is rarely one primary motivation given for a CBDC, both the private sector and central banks cite financial inclusion as a motivation for issuing a digital currency.

This paper discusses central bank digital currency (CBDC) and its potential impact on the monetary transmission mechanism. We first offer a general definition of CBDC which should make the concept accessible to a wide range of economists and policy practitioners. We then investigate how CBDC could affect the various stages of transmission, from markets for central bank money to the real economy. We conclude that monetary policy would be able to operate much as it does now, by varying the price or quantity of central bank money, and that transmission may even strengthen for a given change in policy instruments.

This article analyses the concept of digital currency issuable by a central bank, highlighting its similarities to and differences from the two main liabilities on its balance sheet: cash and bank reserves. It also discusses the main reasons why some central banks are looking into the potential consequences of the introduction of this new instrument. Lastly, it considers different central bank digital currency alternatives and highlights some of the possible implications for monetary policy conduct and for financial stability.

Facing the challenges and leveraging the opportunities from digitalization may require changes to the traditional business model of central banks. This paper focuses on retail payments, where changes are being rapid and highly demanded by customers worldwide. Considering competition and financial stability arguments, it provides a rationale for central banks to have a deeper involvement in retail payment systems by building and keeping control of core components of these systems. Central Bank Digital Currency and Fast Payment Systems are assessed as alternative tools serving central banks to foster efficiency, resilience and security in retail payments, as well as to preserve financial stability.

Entering the millennial era, technology has taken a big role in most sectors of life, including the currency as a product that can only be issued by the central bank. This paper examines the significant effect of central bank digital currency (CBDC) on the design of central bank monetary policy. The paper then sets out some benchmark central bank digital currency (CBDC) in several countries. Many central banks are actively exploring the initiation of sovereign digital currencies. Primary results this study is CBDC providing new monetary instruments, CBDC can improve financial inclusion, and CBDC is potential improvements in monetary policy transmission.

There has recently been increasing international focus on the possible issuance of central bank digital currencies (CBDC), or what might be considered a digital equivalent of banknotes. While the technical feasibility of such a new form of money is not yet established, this paper considers some issues around its possible design, the possible rationales for issuance, and the implications of issuance. Given the likely benefits and risks, at present there does not seem to be a strong public policy case for issuance in Australia. Nonetheless, it will be important to closely watch the experience of other jurisdictions that are considering implementing CBDC projects.

This article contributes to CBDC discussion by evaluating the pros and cons of a public digital currency issued by a central bank across four functional areas: currency distribution, payments, monetary stability and financial stability. Authors distinguish between two kinds of digital currency – ‘conventional’ digital currencies, which rely on existing payments technology to operate, and crypto-currencies which rely on distributed ledged technology (similar to Bitcoin). Authors discover the pros and cons of a central bank issuing a digital currency are mixed across each of the central bank functions, revealing the complexity in evaluating such a currency. In particular, authors find the implications for monetary policy and financial stability could be significant, both positively and negatively.

Central bank digital currencies have been on the rise for the past few years, especially after the emergence of cryptocurrencies like Bitcoin, Ethereum, Ripple and others. Leading central banks like the People’s Bank of China and Riksbanken (Swedish Central Bank), and some of the other central banks around the world have been looking to develop and test central bank digital currencies around the world. Nonetheless, the main question that needs to be answered is if the cryptocurrencies or central bank digital currencies (CDBC) will become the main form of money in the future or will these currencies harmoniously co-exist within the economy paradigm? This paper applies monetary and political economy concepts to discuss how a potential central bank digital currency can be developed and how it would compete with cryptocurrencies. In conclusion, however, the introduction of a central bank digital currency will reduce the monetary policies issues rather than create new issues and this paper will explain how this can be achieved.

This paper looks at the potential benefit that a central bank digital currency (CBDC) could provide in the context of existing payment mechanisms. Central banks today provide the primary payment mechanisms for trade and commerce: cash, used by the public, and electronic payment services, used by eligible financial institutions.

Under the developments of digital innovation, global expansion of cashless payments and the emergence of crypto-assets, some argue that central banks should issue digital currencies that can be used by ordinary people instead of paper-based banknotes. The debates on central bank digital currencies are now gathering great attention from worldwide. Although many of major central banks, including the Bank of Japan, do not have an immediate plan to issue digital currencies that can replace banknotes, some central banks are seriously considering whether they should issue digital currencies in the near future or have already issued them as pilot studies. The debates on central bank digital currencies cover broad issues, such as their possible impacts on payment efficiency, banks’ fund intermediation, liquidity crises and the transmission mechanism of monetary policy. All of these issues have important implications for the functions of money as well as its future.

The ongoing research and development of digital fiat currency (DFC) have triggered attention of policy makers, regulators and the industrial and academic communities. But there is not yet a clear idea and blueprint of what DFC looks like. This paper establishes a systematic framework to analyze the essence and connotation of DFC from four dimensions: currency value, technical aspects, means of implementation and application scenarios. It is argued that DFC is a credit-based currency in terms of value, a crypto-currency from a technical perspective, an algorithm-based currency in terms of implementation and a smart currency in application scenarios. Compared with existing private digital currencies and electronic currencies, DFC will be equipped with brand new and higher qualities. The goal of Chinese DFC is to contribute to more stable value, more secure data, more powerful regulation, stronger empowerment of individuals in payment activities and smarter application. Chinese DFC should have qualities that enable it to provide better service for the public, to offer effective tools for macroeconomic control and to lay a solid foundation for RegTech development.

This paper considers an economy where central-bank-issued fiat money competes with privately issued e-money. Authors study a policy-setting game between the central bank and the e-money issuer and find (1) the optimal monetary policy of the central bank depends on the policy of the private issuer and may deviate from the Friedman rule; (2) there may exist multiple equilibria; (3) when the economy approaches a cashless state, the central bank’s optimal policy improves the market power of the e-money issuer and can lead to a discrete decrease in welfare and a discrete increase in inflation; and (4) first best cannot be achieved. Central-bank-issued e-money leads to a simple optimal policy that achieves the first best.

The emergence of stablecoins is a growing concern for authorities worldwide including Indonesia as it could affect financial stability. Thus, if a central bank chooses to develop a central bank digital currency (CBDC) to tackle this problem, the design should conform to the country’s characteristics and consumer needs. This study draws on experts’ opinions from various economic agents and utilises an amalgamation of the analytic network process (ANP) and the Delphi method to show that the cash-like CBDC model is the most appropriate digital currency design for Indonesia, since it could enhance financial inclusion and reduce shadow banking in Indonesia.

Academics / Researchers

Central bank digital currencies have been on the rise for the past few years, especially after the emergence of cryptocurrencies like Bitcoin, Ethereum, Ripple and others. Leading central banks like the People’s Bank of China and Riksbanken (Swedish Central Bank), and some of the other central banks around the world have been looking to develop and test central bank digital currencies around the world. Nonetheless, the main question that needs to be answered is if the cryptocurrencies or central bank digital currencies (CDBC) will become the main form of money in the future or will these currencies harmoniously co-exist within the economy paradigm? This paper applies monetary and political economy concepts to discuss how a potential central bank digital currency can be developed and how it would compete with cryptocurrencies. In conclusion, however, the introduction of a central bank digital currency will reduce the monetary policies issues rather than create new issues and this paper will explain how this can be achieved.

Central banks around the world are exploring and in some cases even piloting Central Bank Digital Currencies (CBDCs). CBDCs promise to realize a broad range of new capabilities, including direct government disbursements to citizens, frictionless consumer payment and money-transfer systems, and a range of new financial instruments and monetary policy levers. In this paper, authors enumerate the fundamental technical design challenges facing CBDC designers, with a particular focus on performance, privacy, and security. Through a survey of relevant academic and industry research and deployed systems, authors discuss the state of the art in technologies that can address the challenges involved in successful CBDC deployment. Authors also present a vision of the rich range of functionalities and use cases that a well-designed CBDC platform could ultimately offer users.

The benefits and risks of CBDC are complex, encompassing an interplay among financial, legal, and technical considerations. Each country will have to take into account its specific circumstances and initial conditions before deciding whether the potential benefits of introducing a CBDC outweigh the possible costs. The paper suggests a number of topics and issues that deserve special consideration by CBDC designers: monetary policy considerations, ledger infrastructure, wallets and funds / key custody, privacy, opportunities for innovation, secure hardware, and two-layer architectures.

This paper investigates how a central bank digital currency can be expected to impact a monopolistic banking sector. The paper’s framework of analysis combines the Diamond (1965) model of government debt with the Klein (1971) and Monti (1972) model of a monopoly bank. The paper finds that the introduction of a central bank digital currency has no detrimental effect on bank lending activity and may, in some circumstances, even serve to promote it. Competitive pressure leads to a higher monopoly deposit rate which reduces profit but expands deposit funding through greater financial inclusion and desired saving. An appeal to available theory and evidence suggests that a properly designed central bank digital currency is not likely to threaten financial stability.

The following short article aims at presenting some relevant (though less discussed) aspects of concern about introducing central bank digital currency – no matter if intended as a substitute or complement to cash. For example, concrete referral to potential effects such as bank runs and capital flight is also made. Its coexistence with limits for cash payments already existing in several European countries is analytically questioned too. What are also the structural characteristics making paper money and coins (which are the only means of payment directly issued by the central bank) still irreplaceable? These among other topics (like the effects of COVID-19 pandemic for limits for cash payments) will be dealt with following a discursive, yet rigorously macro-economically corroborated approach.

This paper tried to further demystify CBDC, also by representing it in a simple system of financial accounts which allows capturing its flow of funds implications. Moreover, the paper revisited the question how to address the risk, rightly stressed in the literature, that CBDC could structurally, or cyclically (in relation to financial crises) disintermediate the banking system. It was at the same time acknowledged that the control of CBDC quantities is not equivalent to the control of the impact of CBDC on the financial system, since CBDC might be a catalyst for the further shrinkage of bank balance sheets at the benefit of non-bank intermediaries, in particular if CBDC accounts offer relatively comprehensive account services such that many households may no longer feel a need to have a bank deposit account.

One of the main concerns when considering Central Bank Digital Currency (CBDC) is the disintermediating effect on the banking sector in normal times, and even more the risk of a bank run in times of crisis. This paper extends the bank run model of Gertler and Kiyotaki (2015) by analyzing the impact of a CBDC. A CBDC is an additional type of liability to the central bank which, by accounting identity, must be accompanied by respective accommodations on the asset side. The model compares the effects of two different asset side policies with each other and to the economy without a CBDC. Authors find that a CBDC reduces net worth in the banking sector in normal times but mitigates the risk of a bank run in times of crisis. The prevailing concerns about the risk of a bank run turn out to be partial equilibrium considerations disregarding the asset side effects of a CBDC.

The prospect of central banks issuing digital currency (CBDC) immediately raises the question of how this new form of money should co-exist and interact with existing forms of money. This paper evaluates three different scenarios for the implementation of CBDC in terms of their monetary policy implications. In the ‘money user scenario’ CBDC co-exists with both cash and commercial bank deposits. In the ‘money manager scenario’ cash is abolished and CBDC co-exists only with commercial bank deposits. And in the ‘money maker scenario’ commercial bank deposits are abolished and CBDC co-exist only with cash. The evaluation is based on an adaption of the classical international monetary policy trilemma to a domestic monetary system with multiple forms of money. The proposition is that a monetary system with two competing money creators, the central bank and the commercial banking sector, can simultaneously only pursue two out of the three policy objectives.

Authors argue that CBDC can serve as a practically costless medium of exchange, secure store of value, and stable unit of account. However, one crucial question is whether central banks should move expeditiously in considering its adoption. In particular, it might seem prudent to defer such consideration while monitoring developments in private payments and experiences of “early adopters” of CBDC, even if such a deferral involves foregone benefits. Several salient risks of taking a relatively passive and inertial approach are also covered.

The aim of this paper is to analyse the demand of a central bank digital currency (CBDC). Using a financial portfolio approach and assuming that individual preferences and policy votes are consistent, authors identify the drivers of the political consensus in favour or against such as new currency. Given three different properties of a currency – where the first two are the standard functions of medium of exchange and store of value and the third one is the less explored function of store of information – and three different existing moneys – paper currency, banking currency and cryptocurrency – if the individuals are rational but at the same time can be affected by behavioural biases – loss aversion – three different groups of individuals – respectively lovers, neutrals and haters – emerge respect to the CBDC option. Given the alternative opportunity costs of the different currencies, the CBDC issuing is more likely to occur the more the individuals likes to use a legal tender, and/or are indifferent respect to anonymity; at the same time, the probability of the CBDC introduction increases if a return can be paid on it, and/or its implementation can guarantee at least the counterparty anonymity.

Authors examine how the introduction of an interest-bearing central bank digital currency (CBDC) impacts bank activities and monetary policy. Depositors can switch from bank deposits to CBDC as a safe medium of exchange at any time. As banks face digital runs, either because depositors have a preference for CBDC or fear bank insolvency, monetary policy can use collateral requirements (and default penalties) to initially increase bankers’ monitoring incentives. This leads to higher aggregate productivity. However, the mass of households holding CBDC will increase over time, causing additional liquidity risk for banks. After a certain period, monetary policy with tight collateral requirements generating liquidity risk for banks and exposing bankers to default penalties would render banking non-viable and prompt the central bank to abandon such policies. Under these circumstances, bankers’ monitoring incentives will revert to low levels. Accordingly, a CBDC can at best yield short-term welfare gains.

This thesis focuses on the concept of Central Bank Digital Currencies (CBDC) and the possible implications this could entail for monetary policy, commercial banks, and payment systems. With the declining use of cash and increased market capitalization of cryptocurrencies, central banks face an important decision. They need to consider the possible risks this change poses, and potential actions they could take to mitigate a potential weakening of their monetary authority. A CBDC could be a viable option to moderate this risk, but the potential impacts it can have are unknown. This study aims to understand the possible implementation of a CBDC and the effects this could have on monetary policy, commercial banks, and payment systems. Then, the ideal implementation for Norway is considered based on the knowledge gained throughout the thesis.

This paper examines the increasing interest around central bank digital currency (CBDC) across the globe, focusing on progress made to date. A range of projects completed over the past five years with differing scopes and mandates have provided useful insight, and now central bankers focused on issuing a digital currency may choose from a variety of implementations. This paper outlines the existing applications of CBDC, explores potential implementation options, and points to potential technological solutions.

This report summarizes the main findings of the Peer Review of pilots in Bahamas, Sweden and Uruguay. It is focused on lessons drawn with the expert judgment of CBDC WG members on retail CBDC pilots, especially in aspects of design (technological) and implementation (operational). The Peer Review carried out by the CBDC WG delivers several useful insights and lessons that are contained in this report. However, the results are limited to selected experiences from many around the world, like the Digital Currency Electronic Payment (DC/EP) in China. Hence, several aspects would need more research and empirical evidence. Moreover, design, operation and implementation options are unique in each project and thus the lessons learnt by the CBDC WG are a guiding reference but are not intended to serve as an universal approach.

The author documents the benefits, costs, difficulties and risks associated with the potential implementation of a central bank digital currency (CBDC), whether on a wholesale basis, i.e. accessible to designated financial institutions, or on a retail, i.e. universally accessible, basis. He takes deliberately a perspective that is a euro area one and is more practical than that typically adopted in CBDC-related work. He looks first at the potential reasons for issuing a CBDC. He then considers technical and operational aspects. He refers to the legal framework as a third step. He eventually addresses the macroeconomic, monetary and financial consequences. Wherever appropriate, he draws a distinction between the wholesale and retail versions of CBDC, since it is possible to dissociate issuance of one type from the other. He concludes that the retail version, that has attracted most attention, is also the one that raises thornier issues and for which the need seems less pressing in developed economies.

The author lists the main options central banks would be faced with when defining their policies regarding the remuneration of retail CBDC, as well as the main areas they would probably look at when making their choices. He assesses qualitatively the impacts of the choices made on the likely areas of interest for central banks, showing that whether the policy rate and/or the rate on CBDC is positive or null or strictly negative matters. Eventually, the two main policies that stand out are to issue a “banknote-like” CBDC, i.e. not to remunerate it, or to do so following a rule derived from the central bank’s interest rate policy for excess reserves.

The point of departure of this short paper is that, in order to preserve the effectiveness of monetary policy in a world increasingly flooded by private digital currencies, central banks (CBs) will eventually have to issue their own digital currencies. The paper presents two proposals for the implementation of such a currency: a moderate proposal in which only the banking sector continues to have access to deposits at the CB and a radical one in which the entire private sector is allowed to hold digital currency deposits at the CB. The paper contrasts the implications of those two polar paths to a CBDC for the funding of banks, the allocation of credit to the economy, for welfare and for political feasibility. One section of the paper shows that the radical implementation may pave the way toward a narrow banking system and dramatically reduce the need for deposit insurance in the long run. The paper evaluates the relative merits of issuing a currency on a blockchain using a permissionless distributed ledger technology in comparison to a centralized (permissioned) blockchain ledger operated by the CB and concludes that the latter dominates the former in more than one dimension.

The paper evaluates the relative merits of issuing a currency on a blockchain using a permissionless distributed ledger technology in comparison to a centralized (permissioned) blockchain ledger operated by the CB and concludes that the latter dominates the former in more than one dimension. But it does acknowledge that distributed ledger technologies have many actual and potential cost savings benefits in other segments of the financial and real sectors.

This article analyzes stablecoins’ main characteristics, identifies the different types of stablecoins, and considers stablecoins’ role in cryptoeconomics and their potential to revolutionize distributed ledger technology. Furthermore, this article builds on the problems affecting stablecoins, focusing in particular on: the apparent contradiction in implementing a fully decentralized system that is based on a central validator; the endemic opaqueness of auditing operations; conflicts of interest emerging from stablecoins’ relationship with cryptoexchanges; and their role in the recent Bitcoin bubble. Finally, this article highlights the regulatory uncertainty that exists in securities and commodities law, which may cause stablecoins to be characterized in the same way as initial coin offerings (ICOs) and motivate governments and central bankers to design and effectively implement central bank digital currencies (CBDCs). More broadly, this article aims to highlight the factual interconnections linking ICOs, cryptocurrencies, stablecoins and CBDCs.

Authors analyze policy in a two-tiered monetary system. Noncompetitive banks issue deposits while the central bank issues reserves and a retail CBDC. Monies differ with respect to operating costs and liquidity. Authors map the framework into a baseline business cycle model with “pseudo wedges” and derive optimal policy rules: Spreads satisfy modified Friedman rules and deposits must be taxed or subsidized. Authors generalize the Brunnermeier and Niepelt (2019) result on the macro irrelevance of CBDC but show that a deposit based payment system requires higher taxes. The model implies annual implicit subsidies to U.S. banks of up to 0.8 percent of GDP during the period 1999-2017.

Central banks already issue digital money, but only to a select group of financial institutions. Central bank digital currency would extend this to households and firms. This column examines the proposal for such currency and assesses the opportunities and risks. It argues that while preparations for the launch of Libra have not proceeded according to plan, it has become clear that for central banks, maintaining the status quo is not an option.

Authors investigate the implications of an account-based central bank digital currency (CBDC), focusing on its potential competition with the traditional maturity transforming role of commercial banks. The central bank cannot invest in long-term projects itself, but instead has to rely on the expert knowledge of investment banks to do so. Authors have shown that the rigidity of the central bank’s contract with investment banks deters runs. In equilibrium, depositors internalize this feature and exclusively deposit with the central bank such that the central bank arises as a deposit monopolist, attracting deposits away from the commercial banking sector. But this monopoly power eliminates the forces that induce the central bank from delivering the socially optimal amount of maturity transformation.

As digitization has progressed, there has been an increase in private digital currencies. These are virtual goods that have the characteristics of money, offering a unit of account, a medium of exchange and a store of value, introduced by companies. Examples include Facebook Credits, Microsoft Points, or Amazon Coins. They are digital in the sense that they have no physical counterpart; specifically, they are not a claim on real assets. Moreover, they are often “issued” by companies whose activities focus on social networking, video games, or sales of applications for tablets. In this analysis authors ask why companies would find issuing those private digital currencies beneficial, and what strategic considerations are related to such currencies.

Authors examine the economic consequences of an interest-bearing design of the Central-Bank Digital Currency (CBDC), and extend the discussion to an open-economy context with trade and capital flows. Authors use a dynamic stochastic general equilibrium (DSGE) model to simulate a baseline scenario with only a primary monetary policy rule, and two counter-factual scenarios with a primary monetary rule together with a secondary CBDC rule associated with adjustable interest-bearing CBDC — the price rule or the quantity rule. Our simulations show that 1) CBDC with an adjustable interest rate is welfare-improving; 2) a quantity rule delivers the best welfare outcome for society, but with uneven distributional effects between households and financial investors; 3) exchange rate movements and inflation are more stable with the adjustable interest rate; 4) imperfect substitutability between CBDC and bank deposits is the key for the effectiveness of using the CBDC as a secondary monetary policy instrument.

Central bank digital currencies (CBDC) have become a vividly discussed topic over the past few years, and the speed of the debate has gained pace recently. To gain an overview of various perspectives on this topic, SUERF and the BAFFI CAREFIN Centre at Bocconi University convened an expert conference. The conference focused on these questions, among others. Is physical or paper cash really vanishing? How far is this process across the world? How big are differences across countries? What exactly is a CBDC? What are defining properties of a CBDC? What technical options are there? Depending on the combined features, what different types of CBDC might be conceived, and what properties would they each offer? What are the consequences – pros and cons as well as risks – of the various conceptions of CBDC for society at large, for citizens and businesses, for banks, for central banks and monetary policy as well as for financial stability?

The paper finds that indeed digital access, a proxy of CBDC, is positively correlated with financial inclusion but is afflicted by digital inequalities with different or contradictory impacts. For example, an increase in digital access benefits financial inclusion, but owing to inequalities, the increase is at a lower level for older people than for young adults. Further, when the income gap worsens, financial inclusion deteriorates at a higher level for the poor than for the rich. The study concludes that CBDC will be vulnerable to the inheritable e-burdens of digital inequalities. The policy implication is that the baffling risk-averse rigidities of older people towards digital access should be addressed in support of CBDC-linked financial inclusion.

The digitization of payment and the development of private digital currencies have constrained central banks to examine the issuance of their own central bank digital currency (CBDC) in order to face the competition of the new peer-to-peer payment system and the decline of cash use. This chapter addresses the topic of CBDC and places the discussion within the context of dual banking intermediation and financial stability. The design of CBDC in term of accessibility, anonymity, interest rate, and payment mechanism depends on the cryptocurrency use and money characteristics regarding the use of cash and deposit. The CBDC Sharia compliant, free of interest or PLS-based, fulfilling money value stability might be a solution. The effects of CBDC on banking intermediation and financial stability depend importantly on the CBDC design and switch significance of banks deposit to CBDC but remain an open question given the pros and cons arguments.

In this paper, authors propose the function and security requirements of CBDC, through a comprehensive analysis of the existing typical cryptocurrency and the prototype of the CBDC scheme. On this basis, authors present a blockchain-based framework for CBDC with three layers, including supervisory layer, network layer and user layer, and describe the key business processes of the CBDC’s entire lifecycle of issuance-circulation-withdrawal in detail. Finally, authors take cross-border payment as an example to explain the transaction process of CBDC. Authors aim to provide theoretical guidance for CBDC design.

Many publications on Central Bank Digital Currency (CBDC) point out the possibility of granting the public access to CBDC through non-bank third-parties instead of letting the central bank interact directly with the public. However, little attention has been paid to the relationship between these approaches and 100% e-money, which is already issued in El Salvador and is legally possible in a few more countries. Therefore, this paper wants to investigate this relationship by comparing 100% e-money with two models, where CBDC is provided by third-parties which are known from the literature as the custodian and the intermediary model. The findings indicate that the intermediary model and 100% e-money display strong similarities, which has implications for CBDC research. So, research on third-party CBDC could be more goal-driven and give better policy implications. In addition, this research shows regulatory requirements on third-party CBDC and future research areas on 100% e-money.

Central bankers as well as monetary reformers are discussing the introduction of central-bank issued digital currency in coexistence and competition with bank deposits (bankmoney). Among the reasons for this are the gradual disappearance of cash and a far-reaching loss of monetary control. However, a general shift to digital currency (DC) cannot be taken for granted. The paper discusses the conditions and design principles that are tipping the scales in the competition between bankmoney and DC. Relevant issues include access to and available quantities of DC, mutual convertibility of bankmoney and DC, parity of bankmoney with DC, how to deal with bank run situations, central-bank support and government warranties for bankmoney, deposit interest on DC, and the question of negative interest on DC.

This paper discusses the potential and limitations of Bitcoin as a digital currency. Bitcoin as a digital asset has been extensively discussed from the viewpoints of engineering and security design. But there are few economic analyses of Bitcoin as a currency. Bitcoin was designed as a payments vehicle and as a store of value (or speculation). It has no use bar as money or currency. Despite recent enthusiasm for Bitcoin, it seems very unlikely that currencies provided by central banks are at risk of being replaced, primarily because of the market price instability of Bitcoin (i.e. the exchange rate against the major currencies). Authors diagnose the instability of market price of Bitcoin as being a symptom of the lack of flexibility in the Bitcoin supply schedule ‐ a predetermined algorithm in which the proof of work is the major driving force. This paper explores the problem of instability from the viewpoint of economics and suggests a new monetary policy rule (i.e. monetary policy without a central bank) for stabilizing the values of Bitcoin and other cryptocurrencies.

Paying negative interest rates on central bank digital currency (CBDC) becomes increasingly relevant to monetary operations, since several major central banks have been actively exploring both negative interest rate policy and CBDC after the Great Recession. This paper provides a formal analysis to evaluate the macroeconomic impact of negative interest rates on CBDC through the lens of a neoclassical general equilibrium model with monetary aggregates.

Authors study how the introduction of a central bank-issued digital currency affects interest rates, the level of economic activity, and welfare in an environment where both central bank money and private bank deposits are used in exchange. Banks in our model are financially constrained and the liquidity premium on bank deposits affects the level of aggregate investment. Paper suggests the optimal design of a digital currency in this setting, including whether it should pay interest and how widely it should circulate. Authors highlight an important policy tradeoff: while a digital currency tends to promote efficiency in exchange, it may also crowd out bank deposits, raise banks’ funding costs, and decrease investment. Despite these effects, introducing a central bank digital currency often raises welfare.

This paper focuses on assessing the Flow-back Impact on a small country, from the Central Bank Digital Currency (CBDC) implemented by a large country. A large or small country is defined by its influence in global economics, measured by its global trade value, currency dominance and gross domestic product. Examples of a large country include great powers like China, US, UK or the European Union. Examples of small country include Singapore, Denmark, Israel, New Zealand. A flow-back impact is the effect on the small country, when a large country implements a CBDC. Authors will assume that the CBDC implemented by the large country is one which retail consumers can directly access to, and also available to retail consumers in other countries. This study will not worry about how the large country implements or operates such a CBDC, but will instead focus on how such a CBDC will impact a small country.

This article contributes to the discussion by setting out a CBDC framework and formulating broad design principles for CBDC in line with the central bank´s function as Lender of last Resort (LOLR). The attributes and functionality of a CBDC are highly determinative of the architectural design and technical solution chosen, particularly in the context of LOLR. Therefore, we argue in favour of a solid coin for e-emergency liquidity assistance, available 24 hours a day and seven days per week, anonymous, interest-bearing and unlimited, to prevent bank runs and restore financial stability in times of financial distress.

This paper discusses the key considerations of CBDC design to balance benefits and risks and presents best practices in CBDC design from a global perspective. Using China’s CBDC as an illustration, this paper discusses two-tier or multi-tier ledger design and proposes ten enablers of mass adoption and successful implementation. This proposed design allows central banks to manage the process flow, focus on the monitoring and control, without bearing all the load or exposing to over-centralized risks. It concludes that CBDC will be the primary tool in the future digital economy, and countries that are conversant with the technology will have a competitive advantage. Learning from the implementation, continuously reviewing the existing regulation, and improvising whenever international dynamics change the landscape are vital attributes of a successful implementation.

Authors study the evolution of ideas related to creation of assetbacked currencies over the last 200 years and argue that recent developments related to distributed ledger technologies and blockchains give asset-backed currencies a new lease of life. Authors propose a practical mechanism combining novel technological breakthroughs with well-established hedging techniques for building an asset-backed transactional oriented cryptocurrency, which authors call the digital trade coin (DTC). This paper shows that in its mature state, the DTC can serve as a much-needed counterpoint to fiat reserve currencies of today.

The financial system is undergoing fundamental change. Fintechs and bigtechs are pushing the technological frontier, redefining business models, and forcing banks to adapt. In parallel, new forms of money and alternative payment systems are emerging. Alipay, Apple Pay, Bitcoin and new types of digital central bank money compete with traditional bank deposits. What are the macroeconomic consequences of these new means of payment? In this paper authors address five key concerns that are frequently put forward.

When does a swap between private and public money leave the equilibrium allocation and price system unchanged? To answer this question, the paper sets up a generic model of money and liquidity which identifies sources of seignorage rents and liquidity bubbles. Authors derive sufficient conditions for equivalence and apply them in the context of the “Chicago Plan”, cryptocurrencies, the Indian de-monetization experiment, and Central Bank Digital Currency (CBDC). The results imply that CBDC coupled with central bank pass-through funding need not imply a credit crunch nor undermine financial stability.

Central bank digital currencies (CBDC) have become a vividly discussed topic over the past few years, and the speed of the debate has gained pace recently. To gain an overview of various perspectives on this topic, SUERF and the BAFFI CAREFIN Centre at Bocconi University convened an expert conference.

Authors examine the open-economy implications of the introduction of a central bank digital currency (CBDC). They add a CBDC to the menu of monetary assets available in a standard two-country DSGE model and consider a broad set of alternative technical features in CBDC design. Authors analyse the international transmission of standard monetary policy and technology shocks in the presence and absence of a CDBC and the implications for optimal monetary policy and welfare. The presence of a CBDC amplifies the international spillovers of shocks to a significant extent, thereby increasing international linkages. But the magnitude of these effects depends crucially on CBDC design and can be significantly dampened if the CBDC possesses specific technical features. Authors also show that domestic issuance of a CBDC increases asymmetries in the international monetary system by reducing monetary policy autonomy in foreign economies.

A central bank-issued digital currency (CBDC) could solve the volatility of a privately issued cryptocurrency as well as keep intact its potential benefits. This research intended to analyze the possibilities for implementing a CBDC in a viable format that is also Shariah-compliant which may have the capacity to tackle issues plaguing the current financial system. Authors discuss possible scenarios and the resulting impact and consequences of CBDC implementation, through a deep examination of the benefits, opportunities, costs and issues of several conceptual formats. Methodologically, authors used qualitative, comparative and analytical assessments on the critical impact on crucial levers like dilution to monetary policy, and the stability of the financial system. Finally, authors found that the best format was a non-interest bearing CBDC for the interbank settlement and wholesale payment systems which would have the least disruption to the economy but strongest monetary policy transmission.

Breakthroughs in financial technology, ranging from early coins and banknotes to card payments, e-money, mobile payments, and more recently, cryptocurrencies portend transformative changes to the financial and monetary systems. Bitcoin (BTC) and cryptocurrencies bear a significant resemblance to base money or central bank money (CeBM). This functional similarity can potentially pose several challenges to central banks in various dimensions. It may pose risks to central banks’ monopoly over issuing base money, to price stability, to the smooth operation of payment systems, to the conduct of monetary policy, and to the stability of credit institutions and the financial system. From among several potential policy responses, central banks have been investigating and experimenting with issuing central bank digital currency (CBDC). This paper investigates CBDC from a legal perspective and sheds lights on the legal challenges of introducing CBDC in the euro area. Having studied the potential impact of issuing CBDC by the European Central Bank (ECB), particularly on the banking and financial stability, on the efficient allocation of resources (i.e., credit), as well as on the conduct of monetary policy, the paper concludes that issuing CBDC by the ECB would face a set of legal challenges that need to be resolved before its launch at the euro area level. Resolving such legal challenges may prove to be an arduous task as it may ultimately need amendments to the Treaty on the Functioning of the European Union (TFEU).

This study analyses the current debate around central bank-backed digital currency (CBDC). A comparative study was carried out considering countries for and against implementing a CBDC and their reasons, looking for common causes, differences, etc. The conclusion was that there are opposite tendencies between defenders and detractors of establishing a CBDC.

Author offers a macroeconomic perspective on the “Reserves for All” (RFA) proposal to let the general public use electronic central bank money. After distinguishing RFA from cryptocurrencies and relating the proposal to discussions about narrow banking and the abolition of cash author proposes an equivalence result according to which a marginal substitution of outside for inside money does not affect macroeconomic outcomes. The paper identifies key conditions on bank and government (central bank) incentives for equivalence and argue that these conditions likely are violated, implying that RFA would change macroeconomic outcomes. Author also relates the analysis to common arguments in the discussion about RFA and point to inconsistencies and open questions.

The central bank digital currency (CBDC) attracts discussions on its merits and risks but much less attention is paid to the adoption of a CBDC. In this paper, authors show that the CBDC may not be widely accepted in the presence of a sizeable informal economy. Based on a two-sector monetary model, they show an L-shaped relationship between the informal economy and CBDC. The CBDC can formalize the informal economy but this effect becomes marginally significant in countries with significantly large informal economies. In order to promote CBDC adoption and improve its effectiveness, tax reduction and the positive CBDC interest rate can be useful tools. Authors further show that CBDC policy rate adjustment triggers a reallocation effect between formal and informal sectors, through which improves the effectiveness of both conventional monetary policy and fiscal policy.

This paper is a review of Danmarks Nationalbank’s recent analysis of the prospects of implementing a Central Bank Digital Currency (CBDC) in Denmark. Authors concur with Nationalbanken’s conclusion that CBDC does not add efficiency or further functionality to existing payment solutions. They argue, however, that their analysis fails to take into account the potentials for increased financial stability given the fact that CBDC carries no credit risk. Authors also find that Nationalbanken’s dismissal of CBDC on the grounds that it does not provide new monetary policy tools, since interest rates are bound by the fixed exchange rate regime, fails to consider the value of CBDC in the event of a future crisis. Finally, authors argue that the Nationalbanken’s views may reflect a primary concern with the preservation of the existing banking sector in its current form over and above the needs of the general public.

This paper is a critical engagement with the four design principles for Central Bank Digital Currency (CBDC) recently proposed by Kumhof and Noone (KN). It is argued that the implicit notion of parity underlying KN’s analysis is too narrow as it is only focused on the exchange rate between CBDC and bank deposits. Instead, we develop a three dimensional model of parity, which also includes the concepts of purchasing power parity and settlement parity. Applying this model to KN’s proposal, the paper identifes four potential breaking points, where their principles provide a weaker defense of parity between CBDC and bank deposits than what is suggested by their analysis: Gilt traders may create a break of purchasing power parity as they respond to a crisis by quoting different gilt prices depending on whether payment is made in CBDC or bank deposits. Speculators may provoke a break of either purchasing power parity or exchange rate parity by buying gilts for bank deposits, thus forcing the central bank to buy gilts for CBDC, and then subsequently selling gilts for CBDC. The Treasury may find itself forced to break settlement parity, if citizens create a ‘run’ by using only bank deposits to make payments to the government, while demanding payments from the government in CBDC. And finally the central bank cannot use the interest rate on reserves as a separate policy tool to guide the risk-free interest rate in the economy as reserves carry the risk of a break of settlement parity in relation to CBDC.

Over the last decade, private-sector actors have issued several thousands of distributed ledger technology (DLT)-based digital currencies that neither possess intrinsic value nor are they backed by any tangible resources. The issuance of these private digital currencies such as Bitcoin, Ethereum and other altcoins threatens the stability of monetary policy and financial market infrastructures (FMIs). Facing the threat of disruption of monetary policy and financial market instability by such private sector issuances, many central banks have begun research and experimentation into the issuance of central bank-backed digital currencies (CBDCs) to guarantee financial market stability and monetary policy preservation. In this paper, authors present a survey of nine CBDC experiments from the world with the goal of understanding the motivations and factors that influence the technical design considerations of the selected CBDC experiments.

Authors examine how the payment processing role of banks affects their lending activity. In our model, banks operate in separate zones, and issue claims to entrepreneurs who purchase some inputs outside their own zone. Settling bank claims across zones incurs a cost. In equilibrium, a liquidity externality arises when zones are sufficiently different in their outsourcing propensities—a bank may restrict its own lending because it needs to hold liquidity against claims issued by another bank. This work highlights that the disparate motives for interbank borrowing (investing in productive projects and managing liquidity) can have different effects on efficiency.

This paper proposes a CBDC issuance framework based on forward contingencies. The incorporation of time, sector, and loan rate contingencies in the activation of CBDC will realize real-time transmission of monetary policy, enable targeted supply of money and prevent the currency from circulating beyond the real economy. The economic state contingency makes it possible to exercise countercyclical control of currency. The embedment of these contingencies also enables currency to perform the function of forward guidance.

With the rise in popularity of digital assets in the recent years, the existence of decentralized, multinational currencies is becoming an important topic of discussion for central banks, since their control and sovereignty over their respective economies might be in need of a regulated payment system that fits the needs of an increasingly globalized society. One of the most discussed solutions around the world are Central Bank-issued Digital Currencies (CBDC), which bring with them delicate topics regarding legislation, viability and the security of their users.

Central banking in an age of digital currencies is a fast-developing topic in monetary economics. Algorithmic digital currencies such as bitcoin appear to be viable competitors to central bank fiat currency, and their presence in the marketplace may pressure central banks to pursue tighter monetary policy. More interestingly, the blockchain technology behind digital currencies has the potential to improve central banks’ payment and clearing operations, and possibly to serve as a platform from which central banks might launch their own digital currencies. A sovereign digital currency could have profound implications for the banking system, narrowing the relationship between citizens and central banks and removing the need for the public to keep deposits in fractional reserve commercial banks. Debates over the wisdom of these policies have led to a revival of interest in classical monetary economics.

A central bank digital currency, or CBDC, may provide an attractive alternative to traditional demand deposits held in private banks. When offering CBDC accounts, the central bank needs to confront classic issues of banking: conducting maturity transformation while providing liquidity to private customers who suffer “spending” shocks. Authors analyze these issues in a nominal version of a Diamond and Dybvig (1983) model, with an additional and exogenous price stability objective for the central bank. While the central bank can always deliver on its nominal obligations, runs can nonetheless occur, manifesting themselves either as excessive real asset liquidation or as a failure to maintain price stability. We demonstrate an impossibility result that we call the CBDC trilemma: of the three goals of efficiency, financial stability (i.e., absence of runs), and price stability, the central bank can achieve at most two.

Тhis paper focuses primarily on CBDC, given recent attention on digital fiat currency and its potential to promote currency internationalization. CBDC promises increased efficiency and lower costs, improved access to financial services, and greater transparency and accountability in payment systems and financial flows. It also raises new risks and greater technical and regulatory complexity. CBDC’s future will depend, first and foremost, on national authorities’ ambitions and assessments of benefits and risks. CBDC design elements can address individual country preferences, while international cooperation—for instance, on data frameworks, privacy protections, and technical interoperability—will be necessary to fully realize the benefits of CBDC, especially for cross-border payments. Multilateral agreement and CDBC standards will take time, but national authorities can act now to ensure an enabling domestic environment for CBDC and other digital currency developments.

This thesis analysed the classification and mechanism design choices of DCEP from the perspective of two different demands: general demand and central bank demand. Based on pragmatism philosophy, authors use a mixed-methods approach that is a combination of qualitative and quantitative research. Through the interview and surveys, authors identified the demands from the PBOC and the general public in China and the characteristics of DCEP from official claims. Then generate the design choices via the money flower and the pyramid of CBDC models and compare the result with the demand. The analysis shows that the DCEP belongs to type B general-purpose CB digital tokens, and it would adopt a complex multi-layer hybrid architecture design, with the support from both DLT and conventional way. In conclusion, the current mechanism design choices can meet the demands from each side to a certain extent and reached a delicate balance under the trade-off between privacy and security issues.

This paper introduces Official Digital Currency System (ODCS). Proposed digital currency is issued and controlled by the state/central bank of a country that is why authors name it Official Digital Currency (ODC). The process of issuing ODC is almost same as that of Conventional Paper Currency (CPC) but controlling system is different. The proposal also explains country-wide process of day to day transactions in trade through ODCS. ODC is more secure, reliable, economical and easy to use. Here authors introduce just the idea and compulsory modules of ODC system and not the implementable framework, they will present the implementable framework in a separate forthcoming publication.

Digital currency is designed to compete with central bank fiat money and the banking system but may create new financial stability risk. Central banks are considering issuing their own fiat public digital currency in response. This paper shows that privately issued digital currency, such as bitcoin, may be adopted in reaction to distortionary central bank inflation on fiat money. Banks that take private digital currency deposits can emerge to provide efficient liquidity risk sharing without the inflationary risk of fiat money. Rather than displacing banks, private and public digital currency threaten a new form of banking crises caused by disintermediation runs through withdrawals of digital currency. A central bank can act as lender of last resort to prevent the threat of such digital currency runs for banks with public but not private digital currency deposits. There is a trade-off for private digital currency that avoids the costs of central bank inflation but is subject to fragility through digital currency runs.

This paper suggests to use the blockchain as the fundamental technology of CBDC. However, the challenges such as the protection for users privacy, supervision and transaction speed should be overcome. This paper proposes a CBDC model called MBDC which is based on the permission blockchain technology. The model makes use of the multi-blockchain architecture and ChainID to improve the models scalability and process payments more quickly. In this model, central bank and commercial banks and other agencies build and maintain the blockchain. Finally, authors also demonstrate, both theoretically and experimentally, the performance of model on the scalability and the speed of transaction execution etc.

In countries like Sweden and Uruguay, the introduction of a Central Bank Digital Currency (CBDC) – a digital form of legal tender – is already being discussed and piloted. Additionally, central banks worldwide are investigating CBDC. This paper evaluates research from the major central banks and the scientific community regarding CBDC. The focus hereby is on providing a comprehensive view on the topic by introducing, combining and discussing various research fragments. For this purpose, relevant research and publications are identified via a systematic literature review and classified into different groups. Authors find that research on CBDC is still at an early stage in both academia and within central banks, providing several areas of future research. Motivations and rationales for issuing a CBDC as well as possible design opportunities and potential properties of a CBDC are presented. Furthermore, the analysis is extended to include economic aspects, implications for monetary policy and legal issues.

Authors set out a three-pillar monetary-financial framework to (i) analyze, categorize and compare past, current and emerging means of payment; to (ii) capture their creation and destruction processes through sectoral balance sheet dynamics; and to (iii) identify the inherent risks to the current monetary-financial system, also known as the fractional reserve banking system.

Author have constructed a model of asset exchange and means of payment so as to explore the role of central bank digital currency (CBDC), and how this matters for monetary policy. Central bank digital currency potentially increases welfare for three reasons. First, in substituting for physical currency, it serves to limit criminal activity. Second, CBDC can bear interest, which introduces an additional policy instrument for the central bank, and simplifies the problem of eliminating intertemporal inefficiency typically corrected by a Friedman rule. Third, in substituting for private bank deposits as means of payment, CBDC mitigates incentive problems in private banking, provided the central bank can be trusted. Expansion of the reach of central bank liabilities through the issue of CBDC potentially introduces a scarcity of safe collateral, if the central bank is limited to holding government debt. Potentially, this scarcity can be circumvented if the central bank acquires private assets, but this opens up other issues related to the ability of the central bank to screen private assets.

This paper will be focused specifically on the implications of CBDC issue for financial stability. A model of banking and banking panics is developed which has some new features. These new features are designed to highlight how central bank action to replace physical currency with CBDC will affect the incidence of banking panics and their effects on economic welfare. Authors also show how monetary policy, in the form of conventional interest rate policy and central bank crisis intervention, matters in the context of physical currency and CBDC regimes.

Reports of the Chinese government’s plan, via the People’s Bank of China, to introduce a cryptocurrency, digital currency or some other blockchain form of money, have been leaking out for years. Those pronouncements gained a higher level of confirmation in 2019 as Xi Jinping affirmed a commitment to adopting and dominating the blockchain space and the People’s Bank of China (PBOC) made its intentions, if not plans, more explicit. Since then, the intentions and timetable for the introduction of some type of digital RMB have been elevated from the level of rumours to the subject hotly debated headlines and official reports – and more rumours. However, there remains a great deal of ambiguity as to what exactly the PBOC will introduce in 2020 and how it will be used. More controversial is the intention of the PBOC and how its actions will fit into a larger strategic approach to global and regional affairs by the Chinese Communist Party (CCP).



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