Latest developments
- The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Sveriges Riksbank and the Swiss National Bank, together with the Bank for International Settlements (BIS), have created a group to share experiences as they assess the potential cases for central bank digital currency (CBDC) in their home jurisdictions.
- Accenture, the Digital Dollar Foundation, and FTI Consulting have formed the Digital Dollar Project which aims to advance exploration of a United States Central Bank Digital Currency (CBDC). The Project will develop a framework for potential, practical steps that can be taken to establish a dollar CBDC.
A cash-like or a deposit-like CBDC
A cash-like CBDC risks reducing cash demand below the critical mass where ATMs become sparser and fewer shops accept cash, placing at risk the variety of payment instruments that is valuable to households with diverse needs. A deposit-like CBDC could threaten banks’ deposit base, with negative implications for credit provision and output. On the other hand, an optimally designed interest-bearing CBDC hits the aims of safeguarding bank intermediation and protecting the trio of payment instruments.
Designing Central Bank Digital Currencies
Authors: Itai Agur, Anil Ari, Giovanni Dell’Ariccia
From: IMF
Some issues with interest bearing CBDC
In this paper, Fernández-Villaverde and al. investigate the implications of an interest bearing CBDC on financial intermediation. They select a model that emphasizes the role of banks in maturity transformation: banks finance long-term projects with demand deposits, which may be withdrawn at a shorter horizon. Since a central bank cannot invest in long-term projects itself, it relies on investment banks to do so. As depositors realize that the rigidity of the central bank’s contract with investment banks deters runs, they exclusively deposit with the central bank so that the central bank arises as a deposit monopolist. But this monopoly power eliminates the forces that induce the central bank from delivering the socially optimal amount of maturity transformation.
Central Bank Digital Currency: Central Banking For All?
Authors: Jesús Fernández-Villaverde, Daniel Sanches, Linda Schilling, Harald Uhlig
From: University of Pennsylvania, Federal Reserve Bank of Philadelphia, Ecole Polytechnique, University of Chicago
…for the technologically adept!
In this paper, Ali and Narula review some of the technologies that have been developing in cryptocurrencies over the past ten years and consider how they might address concerns around centralization, competition, risk, surveillance, and privacy when designing a digital fiat currency, stablecoin, or a central bank digital currency.
Redesigning digital money: What can we learn from a decade of cryptocurrencies?
Authors: Robleh Ali, Neha Narula
From: MIT
