Retail central bank digital currency
As a consequence of the quantitative easing aimed at combatting the financial crisis the digital fraction of the monetary base has grown dramatically over the past 15 years, rising from less than 30 percent to more than 80 percent.
Since we are already living in a world of digital money and digital payments recent proposals imply that central banks should issue retail digital currencies. But Cecchetti and Schoenholtz see very little upside for central banks to issue retail digital currencies and instead, see an enormous risk to the commercial banking system and political challenges for central banks. Would capitalism survive the introduction of retail digital currencies?
Universal Central Bank Digital Currency?
By: Stephen G. Cecchetti, Kermit L. Schoenholtz – New York University, Brandeis University
Central Bank digital currencies and bank runs
During times of stress if small depositors can withdraw money from their accounts while in their pajamas, wouldn’t this make banks more susceptible to sudden shifts in sentiment?
[In] a world with digital currency. In the event of a panic, customer redemption requests will be instantaneously granted by the bank facing the run. But that same speed also works in favor of the bank, since a request to the central bank for a top-up of digital currency could be filled in just a few seconds. Since all depositors get what they want when they want, no lineups are created. And so the viral nature of the panic is reduced.
Critiquing the Carney critique of central bank digital currency
By: JP Koning
A failed experiment in Ecuador
In February 2015 the Ecuadorian Central Bank began issuing a digital currency. But instead of creating default-risk-free accounts denominated in its own domestic fiat money it actually issued claims to US dollars. Since Ecuador defaulted on sovereign dollar-denominated bonds in 2008 the Ecuadorian public recognized a risk of default or devaluation with the central bank’s electronic money accounts, and stayed away from them.
The World’s First Central Bank Electronic Money Has Come – And Gone: Ecuador, 2014-2018
By: Larry White – George Mason University
