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In recent years, central bank digital currency (CBDC), a new form of digitized sovereign currency, has risen to prominence as a policy and operational consideration for many central banks, ministries of finance and other institutions. The intricacies of implementing CBDC are complex and the implications are wide‑reaching. As a result, policy‑makers may find themselves in uncharted waters when attempting to evaluate the potential benefits and trade‑offs associated with CBDC. The World Economic Forum’s CBDC Policy‑Maker Toolkit seeks to address the need for a concise CBDC decision guide that provides comprehensive and risk‑aware information to policy‑makers. This document serves as a possible framework to ensure that any CBDC deployment fully considers the costs as well as the potential benefits, appraising a multitude of risks and evaluating deployment and governance strategies, alternative solutions and other salient factors. Notably, it is not exhaustive, and instead intends to serve as a complement to additional research that any policy‑maker considering CBDC should conduct.

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 digitalization of the economy and technological innovations are pushing central banks to investigate new forms of digital money. The concept and design of digital currencies have been investigated by central banks for some time. Although much progress has been made towards a convergence on definitions, the term Central Bank Digital Currency (CBDC) is still used to refer to a number of concepts. In this paper authors address this issue by extending and refining the previous work, the Reference Ontology of Money and Virtual Currencies, to provide a semantic foundation for the concept of CBDC.

The distributed ledger technology has sparked the interests in policy makers to consider a digital replacement of physical cash — the central bank digital currency (CBDC). Theories suggest that CBDC facilitates an interest-bearing design that complements existing monetary policy framework, but in reality cash has never been associated with an adjustable return. Adjustable return or adjustable interest rate refers to letting the interest rate on money xii bridge this gap by examining the economic consequences of an interest-bearing design of CBDC, and extend the discussion to an open-economy context with trade and capital flows. Through the lens of a dynamic stochastic general equilibrium (DSGE) model, the study simulate a baseline scenario which resembles a cash economy, and two counter-factual scenarios associated with interest-bearing CBDC — the price rule and the quantity rule regimes.

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.

Introduction of a digital currency issued by the central bank will lead to a direct competition for bank deposits between Central Bank and Commercial banks which eventually lead banking system toward full reserve structure.

Distributed ledger technology (DLT) enables a wide range of innovative industrial use cases and business models, such as through programmable payments and the seamless exchange of assets, goods, and services. To exploit the full potential of a DLT-based European economy, it is crucial to the euro into DLT networks. In this paper, we propose a framework for developing payment solutions for a DLT-based European economy. To this end, we decompose the digital payments value chain into three pillars: (1) contract execution system, (2) digital infrastructure, and (3) monetary unit. Based on this framework, we systematically compare account- and token-based payment solutions, including a bridge solution, e-money tokens, synthetic central bank digital currencies (CBDCs), and a central bank digital currency (CBDC). Taking into account current circumstances, we conclude that no individual payment solution will be sufficient to address all emerging use cases. Instead, a broad array of payment solutions will emerge and co-exist. These solutions will apply to a variety of different use cases and will be launched at different points in time.

The paper explores the precarious balance between modernizing monetary systems by means of digital currencies (either issued by the central bank itself or independently) and safeguarding financial stability as also ensured by tangible payment (and saving) instruments like paper money. Which aspects of modern payments systems could contribute to improve the way of functioning of today’s globalized economy? And, which might even threaten the above mentioned instable equilibrium? This survey-paper aims, precisely, at giving some preliminary answers to a complex – therefore, ongoing – debate at the scientific as well as the banking and the political level.

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.

With the impending ‘decline of cash’ and the rise of digital currencies (such as Bitcoin), there are strong arguments for central banks to start issuing “digital cash” – an electronic version of notes and coins. But this raises a number of questions: how would central banks get new digital cash into the economy, and how would the public use it? What would the advantages be? And would there be any impact – positive or negative – on financial stability?

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.

The discussion about central bank digital currencies (CBDC) has gained an impressive momentum. So far, however, the main focus has been on the macroeconomic implications of CBDCs and the narrow perspective of developing a digital substitute for cash. This paper adds a microeconomic dimension of CBDC to the discussion. Authors provide an overview of the existing payment ecosystem and derive a systemic taxonomy of CBDCs that distinguishes between new payment objects and new payment systems. Using systemic taxonomy, authors are able to categorize different CBDC proposals. In order to discuss and evaluate the different CBDC design options, they develop two criteria: allocative efficiency, i.e. whether a market failure can be diagnosed that justifies a government intervention, and attractiveness for users, i.e. whether CBDC proposals constitute attractive alternatives for users compared to existing payment objects and payment systems. The analysis shows that there is no justification for digital cash substitutes from the point of view of allocative efficiency and the user perspective. Instead, it opens the perspective for a retail payment system organized or orchestrated by the central bank without a new, independent payment object.

In this study, authors provide a systemic perspective on central bank digital currencies (CBDC). They separate existing proposals for CBDCs into the perspective of new payment objects, made available by central banks to a broader public, and new payment systems, operated by central banks. From a systemic perspective, CBDC proposals need to be examined to see how they would fit into the existing ecosystem of national, supraregional, and international payment systems. To analyze the main implications of introducing CBDCs, authors provide a price theoretical banking model, which allows private non-banks to switch between holding bank deposits and CBDCs. In addition to the CBDC payment objects, they also present the option of a store-of-value CBDC. While most CBDC proposals incorporate new payment objects with new or existing payment systems, authors discuss whether central banks could establish new payment systems without offering a new payment object.

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.

Undoubtedly inspired by recent advances in technology-driven payment systems such as mobile payment systems, cryptocurrencies, and blockchain technologies, recent years have seen central banks worldwide explore the possibility of issuing digital forms of at money called central bank digital currencies or CBDCs. A thoughtfully designed CBDC can help satisfy numerous policy objectives, improve economic efficiency and inclusivity, and serve as a platform for economic innovation. However, the vast CBDC design landscape, coupled with its potential to massively disrupt the financial system and broader economy, warrants caution, calling for a careful and methodical analysis of various designs’ strengths, weaknesses, and risk profiles.

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.

In this paper, we propose an offline payment system (OPS) protocol for CBDC that allows a user to make digital payments to another user while both users are temporarily offline and unable to connect to payment intermediaries (or even the Internet). OPS can be used to instantly complete a transaction involving any form of digital currency over a point-to-point channel without communicating with any payment intermediary, achieving virtually unbounded throughput and real-time transaction latency. One needs to ensure funds cannot be double-spent during offline payments as no trusted intermediary is present in the payment loop to protect against replay of payment transactions. Our OPS protocol prevents double-spending by relying on digital signatures generated by trusted execution environments (TEEs) which are already available on most computer devices, including smartphones and tablets. While a TEE brings the primary point of trust to an offline device, an OPS system requires several cryptographic protocols to enable the secure exchange of funds between multiple TEE-enabled devices, and hence a reliable financial ecosystem that can securely support CBDC at scale.

Central banks around the world are evaluating the option of issuing a centrally banked digital currency (CBDC). There are a number of policy objectives attributed to offering a CBDC. Curiously, some of the stated objectives are contradictory. This confusion is a consequence of a very broad design landscape, which runs contrary to the conventional wisdom that suggests CBDCs can be broken into 2 or 4 main categories. In this paper, authors systematically iterate through 8 key design decisions, most of which have 3 or more possible designs. The design landscape is based on dozens of whitepapers and technical reports issued by central banks, international financial institutions, and technology firms. By laying out a comprehensive set of options, authors offer central banks a finer grained approach to tailoring a design that meets their specific objectives—objectives that will change from country to country.

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.

Central bank digital currency (CBDC) is currently a hot topic, discussed in a significant number of central banks as well as in academic circles. As can be expected, there is no clear-cut definition of CBDC. Rather, there are different variants of CBDC being in discussion with mainly one feature in common: It is digital money issued by the central bank. For the purpose of this paper, we focus on CBDC on an account basis that is available for the general public. Thus, in this paper, CBDC is synonym for digital money deposited at the central bank, with every adult being entitled to hold such an account, without any limit to swap deposits against CBDC.

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.

Money is central to our lives but is still something very abstract. From a consumer’s perspective, over the centuries it has evolved from touchable objects (coins and, later, banknotes) to a gradually more “touchless” system – via credit cards or, increasingly, smart phones. The coronavirus crisis has speeded up this process of evolution, at least as regards the willingness of consumers to use electronic payments – especially in those countries where previously there was some reluctance. At the same time, modern technologies such as block chain (previously associated with privately-managed cryptocurrencies) allow for new ways of payment.

Technology, money and payment systems have been interlinked from the earliest days of human civilization. But over the past two decades technology has reshaped money and payment systems to an extent and speed never before seen. Milestones include the establishment of M-Pesa in Kenya in 2007 (creating mobile money systems), Bitcoin in 2009 (triggering in time the explosive growth in distributed ledger technology and blockchain), the announcement of Libra in 2019 (triggering a fundamental rethinking of the potential impact of technology on global monetary affairs), and the announcement of China’s central bank digital currency – the Digital Currency / Electronic Payment (DCEP) here referred to as the Digital Yuan (marking what is likely to be the first major economy sovereign digital currency). The COVID-19 pandemic and crisis of 2020 has spurred electronic payments in ways never before seen. In this paper, authors ask the question: In the context of the crisis and beyond, what role can technology play in improving the effectiveness of money and payment systems around the world?

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.

This study outline the common motivations driving central bank work on CBDCs. We then explore CBDCs’ potential impacts on financial inclusion, a primary motivation in developing and emerging markets that has also gained significant traction in developed economies during the COVID-19 related global recession. Author conclude that for CBDCs to achieve its financial inclusion goals, more technical advancement in offline adaptability and policy deliberations around issues of identity and traceability are needed.

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.

The monetary arrangements of societies are the result of the interplay of technology and ideas. Technology determines, for example, which coins can be minted and at what cost. Simultaneously, ideas about private property and the scope of government determined whether private entrepreneurs were allowed to compete with governments in the supply of small change. Technology and ideas about money engage dialectically. Technological advances shape our ideas about money by making new monetary arrangements feasible. Ideas about desirable outcomes direct innovators to develop new technologies.

In recent years, cryptocurrencies such as Bitcoin have emerged, in upcoming years, corporate currencies such as Libra (Diem) and central bank digital currencies will emerge even in low-inflation developed economies. Using the dual currency search model of Kiyotaki and Wright (1993), authors show how the introduction of a supplement to traditional money affects average utility. The room for a welfare improvement depends on differences in returns and costs, but, in particular, on the fraction of cash traders who will be replaced by digital money traders.

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.

Since technological innovations provoked a rethinking of the monetary system, central banks analyze the potentials and risks of central bank digital currencies (CBDCs). While CBDCs offer several benefits, many suggest that they impose a threat to financial stability as they might disintermediate commercial banks and facilitate bank runs. To analyze these concerns, authors develop an appropriate New Keynesian DSGE framework. Our focus lies on the effects of interest- and non-interest-bearing CBDCs in times of financial crises and their interaction with the zero lower bound (ZLB). Additionally, authors study the role of central bank funding and a rule-based interest rate on CBDCs. Authors find that CBDCs indeed crowd out bank deposits and affect bank funding. However, this crowding-out effect is not necessarily a threat to financial stability and a cause for economic disturbances when the central bank chooses an adequate policy.

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.

Acceleration in digital technology has provided a unique window of opportunity to fix the decades-old problem of low efficiency and high cost of cross-border payments. When people look back at this moment in history many years later, it may prove to be a turning point after which cross-border payments will have gradually become indistinguishable from domestic payments.

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.

The findings in this research study are based on the analysis of a new data set collected from 57 individual stablecoins. The total number of active projects makes stablecoins one of the largest cryptoasset categories, and as author shows in the report stablecoins are also a leading category across a number of other key metrics (e.g., venture funding). The level of interest and resources devoted to stablecoins is striking and indicates that stablecoins are viewed as a very important part of the digital assets ecosystem. Indeed, stablecoins are often thought of as a foundational or infrastructure layer, one that could significantly expand the cryptoasset userbase from our current estimate of approximately 20-30 million individuals.

The purpose of this policy brief is to improve baseline understanding of DC/EP’s structural mechanics and place the project in its political and bureaucratic context. The aim is to catalyse and contribute to an informed conversation about what the rollout of DC/EP may mean for China and for the world.

In this paper, authors provide a non-technical overview of the advantages a central bank issued digital currency (CBDC), mechanisms through which such a currency can be implemented and how it might interact with the conventional banking system. The discussion includes but is not limited to distributed ledgers and authors briefly consider the examples of three pilot CBDC projects.

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 proposes to provide Asian common currency in the form of digital currency using technology such as blockchain by an international organization (eg AMRO) in East Asia. In this proposal, authors assume that each present currency and the new digital common currency coexist in the respective economies for the time being. With the advent of digital currency, the common currency has become more technically feasible. This proposal has the following three advantages; (1) merits as a digital currency, (2) merits as a common currency, and (3) a currency that is managed in a multilateral flamework. By the last point, it could prevent dominant control of an international currency by large countries, and political fairness can be secured.

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.

Policymaking circles and central banks around the world are now giving serious consideration to the pros and cons of making central bank digital currencies (CBDCs) available to the general public. While the consensus view remains that such a move would be premature, opinion appears to be shifting. Indeed, developments in a number of advanced and emerging economies indicate that the CBDC model is receiving more serious consideration than it has in the past. The numerous speeches and research papers coming from central banks are testament to this growing interest. Moreover, some countries and central banks have moved beyond talking and have taken active steps to push the initiative further.

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.

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.

Digitization has reached the monetary system. The advent of crypto assets, such as Bitcoin and Ether, revealed numerous advantages these digital assets based on distributed ledger technologies (DLTs) can bring: Using DLT can enhance the security of sensitive financial transaction data, increase transaction speed through faster processing and settlement and automate numerous business processes through smart contracts. These advantages ought to be realized in the conventional monetary system as well — not only in the «crypto industry”. DLT can be used both to digitally represent bank deposits and to tokenize central bank money via central bank digital currencies (CBDCs). Current DLT-based CBDC projects and prototypes among others by the Chinese and Swedish central banks, but also initiatives by the European Central Bank (ECB), show that DLT will be an essential pillar ofthe digitization of the monetary system in particular and the financial system in general in the future.

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.

The ongoing digital revolution may lead to a radical departure from the traditional model of monetary exchange. We may see an unbundling of the separate roles of money, creating fiercer competition among specialized currencies. On the other hand, digital currencies associated with large platform ecosystems may lead to a re-bundling of money in which payment services are packaged with an array of data services, encouraging differentiation but discouraging interoperability between platforms. Digital currencies may also cause an upheaval of the international monetary system: countries that are socially or digitally integrated with their neighbors may face digital dollarization, and the prevalence of systemically important platforms could lead to the emergence of digital currency areas that transcend national borders. Central bank digital currency (CBDC) ensures that public money remains a relevant unit of account.

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.

In this paper, authors use a variety of machine learning methods to quantify the extent to which economic and technological factors are predictive of the progression of Central Bank Digital Currencies (CBDC) within a country, using as a measure of this progression the CBDC project index (CBDCPI). Authors find that a financial development index is the most important feature for the model, followed by the GDP per capita and an index of the voice and accountability of the country’s population. The results are consistent with previous qualitative research which finds that countries with a high degree of financial development or digital infrastructure have more developed CBDC projects. Further, authors obtain robust results when predicting the CBDCPI at different points in time.

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.

Central banks are getting closer to issuing their own digital currency. If they do, the dollar might finally face real competition as the world’s dominant currency. Dave Michaels and Paul Vigna suggest “History teaches that the transition to a new global reserve currency may not proceed smoothly”.

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.

This article analyzes the current situation of Central Bank Digital Currencies (CBDCs), which are digital currencies backed by a central bank. It introduces their current status, and how several countries and currency areas are considering their implementation, following in the footsteps of the Bahamas (which has already implemented them in its territory), China (which has already completed two pilot tests) and Uruguay (which has completed a pilot test). First, the sample of potential candidate countries for establishing a CBDC was selected. Second, the motives for implementing a CBDC were collected, and variables were assigned to these motives. Once the two previous steps had been completed, bivariate correlation statistical methods were applied (Pearson, Spearman and Kendall correlation), obtaining a sample of the countries with the highest correlation with the Bahamas, China, and Uruguay. The results obtained show that the Baltic Sea area (Lithuania, Estonia, and Finland) is configured within Europe as an optimal area for implementing a CBDC.

The ability to access quality financial services and cash has been indicated by various organizations, such as the World Bank or UN, as a fundamental aspect to guarantee regional sustainable development. However, access to cash is not always guaranteed, especially in rural regions. The present study is based in the Ávila region of Spain. A parameter called the “access to cash index” is constructed here. It is used to detect rural areas where the ability to access cash and banking services is more difficult. Based on the “access to cash index”, two sustainable solutions are proposed: The first (in the short term), based on extending access to cash, takes advantage of the existing pharmacy network. With this measure, a notable reduction of more than 55% of the average distance required to access this service is verified here. The second is based on the implementation of a central bank digital currency. Here, the results show an acceptance of 75%. However, it is known that elderly people and those without relevant education and/or low incomes would reject its widespread use. Such a circumstance would require the development of training and information policies on the safety and effectiveness of this type of currency.

The United States financial system can be restructured by giving universal direct access to credit risk-free central bank money. In the 10 years since the financial crisis, technological advancements and regulatory tools have laid the foundation for Central Bank Digital Currencies to emerge as this economic resolution. This paper analyzes similar economic cases and contends that introducing Central Bank Digital Currencies (CBDCs) can improve financial stability without degrading credit availability in the long term. Authors illustrate this by focusing on similar market shifts, namely in the U.S. student loan market and the New Zealand agribusiness sector. The analysis show cases that by introducing CBDCs, market participants can subsequently remove certain market subsidies that promote poor risk practices and improper pricing. This subsidy to financial institutions is both explicit in the form of FDIC deposit insurance and implicit in the stipulation of taxpayer funded bailouts that materialized in 2008. Authors calculate the effect of introducing CBDCs by focusing on historical market examples when similar fundamental market shifts happened. Conclusion is that CBDCs may diminish credit availability, but this effect is ameliorated as financial stability improves in subsequent years. Accordingly, authors recommend a roadmap for rolling out CBDCs in the least disruptive fashion.

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 four thousand digital currencies have been issued by private sector actors since the release of Bitcoin in 2009. Private sector issuance of distributed ledger technology (DLT)-based digital currencies such as Bitcoin and other altcoins threatens the stability of financial market infrastructures (FMIs) and preservation of monetary policy (MP). Facing the threat of disruption of MP and FMIs by the private sector digital currency issuances, many central banks and monetary authorities have delved into research on central bank-issued digital currencies (CBDCs). In this paper, authors present a survey of selected DLT-based wholesale CBDC (W-CBDC) experiments with completed proof-of-concepts to enable the understanding of the practices, motivations and technologies for W-CBDC experiments. Ultimately, the paper organizes all the relevant DLT-based W-CBDC experiments-to-date in one place to serve as a reference point for CBs, MAs and researchers studying about DLT-based CBDCs.

Over five thousand digital currencies have been issued by private sector actors since the release of the Bitcoin digital currency in 2009. Private sector issuance of distributed ledger technology (DLT)- based digital currencies such as Bitcoin, Ethereum and other altcoins threaten the stability of financial market infrastructures and preservation of monetary policy. Consequently, many central banks and monetary authorities have begun research and experimentation on central bank-issued digital currencies (CBDCs) to mitigate this threat. In this paper, authors present a comprehensive survey of publicly available DLT-based CBDC experiments with completed proof-of-concept prototypes from across the world to enable an understanding of the motivations and best practice approaches for undertaking CBDC experiments. Authors provide a classification and generic framework for CBDCs and highlight existing DLT platform limitations and use cases in the financial services industry. Overall, this paper organizes in one place, all the relevant, publicly available DLT-based CBDC experiments with completed proof-of-concept prototypes to serve as a reference point for central banks, monetary authorities and researchers desiring to undertake research on DLT-based CBDCs. Ultimately, authors present a survey on the technical feasibility and challenges of leveraging DLT to issue the selected CBDC experiments surveyed in this paper.

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 in the Central Bank Digital Currency series looks at the implementation and design considerations for a retail CBDC in the Canadian context. A retail CBDC is aimed to take on traditional attributes of physical cash and would be used by consumers and businesses (relative to wholesale CBDC, which would be used by financial institutions). The Bank of Canada has taken into consideration the declining use of cash and the sovereignty of monetary policy transmission when discussing the objectives of a retail CBDC in Canada. This paper outlines the Bank of Canada’s motivations behind retail CBDC issuance, the attributes needed for successful retail CBDC implementation in Canada, and investigates token versus account-based retail CBDC design considerations.

This paper is the first in Payments Canada’s series exploring the implications of central bank digital currency (CBDC) in a Canadian context. This paper aims to explore the motivations for CBDC issuance as they pertain to Canada and how retail and wholesale CBDCs will work in conjunction with current central bank liabilities. The paper outlines the differences between CBDC, cryptocurrency and conventional bank notes, as well as discusses emerging CBDC use cases.

This paper studies the welfare effects of introducing a Central Bank Digital Currency (CBDC). Its premise is that CBDC is a new product in the market for liquidity where it competes with both commercial bank deposits and credit lines used for payments. If the central bank offers CBDC but not credit lines, then it interferes with the complementarity between credit lines and deposits built into modern payment systems. As a result, increasing CBDC may reduce welfare even if the central bank can provide deposits more cheaply than commercial banks.

This paper critically discusses the idea of introducing central bank digital currencies (CBDC) in view of central banks’ responsibility for monetary and financial stability. Authors first argue that cash cannot be digitalized without being deprived of its characteristics as an inclusive, crisis-proof and anonymous means of payment. Authors then lay out that much of the debate about CBDC is a debate about structural reforms of the monetary-financial system rather than technological innovation. While CBDC has the potential to increase the speed and efficiency of the payment system, it involves risks associated with financial disintermediation, centralization of credit allocation within the central bank, and bank runs. Authors discuss the channels through which money today acquires legitimacy as a means of payment, a store of value, and a unit of account, and stress that it cannot be taken for granted that CBDC will achieve the same level of legitimacy that currency enjoys today.

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.

Digital currencies have the potential to improve the speed and efficiency of payments and to broaden financial inclusion. The principal goal is to facilitate payments among consumers on a day-to-day basis as an alternative to cash, both domestically and across national borders. This Article begins by critically examining and critiquing the ongoing progress to try to develop retail digital currencies, focusing on the two most feasible approaches: central bank digital currencies (CBDC), and privately-issued currencies that are backed by assets having intrinsic value (stablecoins). The Article then analyzes how these digital currencies should be regulated and supervised, exploring their similarities and differences. Both CBDC and stablecoins raise innovative legal issues as well as the types of legal issues normally associated with payment systems, although in novel contexts. If widely used, stablecoins also could impair central banks’ ability to control monetary policy and possibly undermine confidence in the value or operational continuity of currencies, which could threaten international monetary and financial stability. Stablecoin regulation must also address those potential threats.

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.

From both theoretical and practical perspectives, authors examine the global development and competition of digital currencies, and investigate the design of China’s central bank digital currency (CBDC). Moreover, on the basis of correcting shortcomings in the existing literature, authors undertake a quantitative analysis of the economic impact of the issuance of DC/EP based on a four-sector DSGE model. The results demonstrate that the substitution effect of DC/EP on bank deposits is limited, while the unit impact can enhance the economic growth rate by 0.15% and the overall economic effect is positive, at the same time it reduces the leverage ratio to a certain degree, which is conducive to reducing systemic financial risk. Therefore, authors contend that China should accelerate the research and development of DC/EP and launch pilot schemes to promote DC/EP. Moreover, China should actively participate in the drafting of international regulations for digital currencies, selectively liberalize the jurisdiction of overseas nodes, jointly establish an integrated digital infrastructure for future generations.

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.

Recently digital currency has received significant attention, and among many topics within digital currency, CBDC (Central Bank issued Digital Currency) has been a hot topic as it will affect national currency systems. RSCoin is the first CBDC model sponsored by Bank of England, and it uses the UTXO model from Bitcoin. This paper proposes a new CBDC model Panda model that can store account balance like current banking systems, but use efficient consensus protocols to ensure that relevant parties have consistent views of transactions and accounts. The Panda model is scalable as it can include as many financial institutions or individuals as possible in the system with increasing or decreasing workloads. The model has been simulated in the TaiShan Sandbox in Qingdao.

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.

Central bank digital currency (CBDC), with its dramatic differences from paper currency in terms of both currency and data, is likely to be a game changer in the international financial system. This article examines what kind of CBDC network is likely to emerge in the future, and the impact it would have on regulation and the global financial network (GFN). It argues first that the CBDC network is likely to be a decentralized network and overall adopt an uncoordinated network-as-structure approach. Second, the CBDC network could bring policy diffusion effects but may not necessarily lead to convergence in regulation, as states would behave largely instrumentally. Third, a CBDC network would affect the GFN and particularly the power balance between different actors, possibly leading to a flatter network.

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).

Сhina is pursuing global dominance in financial technology. The country’s central bank, the people’s Bank of China (PBOC), is developing a digital version of the renminbi that it intends will replace its physical currency. Through this project, Beijing is aiming to advance China’s technical and economic prowess, strengthen Chinese Communist Party (CCP) control over the Chinese population, and counter U.S. financial influence around the globe. And while numerous central banks are conducting central bank digital currency (CBDC) research and pilots, China’s effort is the most advanced of any large, major economy to date.