Digital Currencies
225341130
Rise of the Central Bank Digital Currencies: Drivers, Approaches and Technologies
Central bank digital currencies (CBDCs) are receiving more attention than ever before. Yet the motivations for issuance vary across countries, as do the policy approaches and technical designs. We investigate the economic and institutional drivers of CBDC development and take stock of design efforts. We set out a comprehensive database of technical approaches and policy stances on issuance, relying on central bank speeches and technical reports. Most projects are found in digitised economies with a high capacity for innovation. Work on retail CBDCs is more advanced where the informal economy is larger. We next take stock of the technical design options. More and more central banks are considering retail CBDC architectures in which the CBDC is a direct cash like claim on the central bank, but where the private sector handles all customer facing activity. We conclude with an in depth description of three distinct CBDC approaches by the central banks of China, Sweden and Canada.
Raphael A Auer Giulio Cornelli Jon Frost
5115101
Bitcoin and Beyond: A Technical Survey on Decentralized Digital Currencies
Besides attracting a billion dollar economy, Bitcoin revolutionized the field of digital currencies and influenced many adjacent areas. This also induced significant scientific interest. In this survey, we unroll and structure the manyfold results and research directions. We start by introducing the Bitcoin protocol and its building blocks. From there we continue to explore the design space by discussing existing contributions and results. In the process, we deduce the fundamental structures and insights at the core of the Bitcoin protocol and its applications. As we show and discuss, many key ideas are likewise applicable in various other fields, so that their impact reaches far beyond Bitcoin itself.
IEEE Communications Surveys Tutorials
Florian Tschorsch Bjorn Scheuermann
213438242
Macro and Micro Implications of the Introduction of Central Bank Digital Currencies: An Overview
After the emergence and widespread of cryptocurrencies central banks are studying how their own digital currencies may help and favor the monetary policy implementation. There are many challenges to this process both in legal and economic (financial, monetary) areas. The paper studies the potential movement from a two tier banking system (central bank and banks) to a one tier banking system in case of CBDCs emission, including the issues of competition and commercial banking profitability. More specific question is the change of the transmission of monetary policy with CBDC emission.
Gerard Mondello Elena S Sinelnikova P V Trunin
201327597
From cash to central bank digital currencies and cryptocurrencies: a balancing act between modernity and monetary stability
Purpose 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. Design/methodology/approach Which aspects of modern payment 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 scientific as well as banking and political levels. Findings The coexistence of State's money (i.e. "legal tender" and cryptocurrencies can have a disciplining effect on central banks. Nevertheless, there are still high risks connected to the introduction of central bank digital currency, which should be by far not considered to be a perfect substitute of current cash. At the same time, cryptocurrencies issued by central banks might be exposed to the drawbacks of cryptocurrencies without benefiting from correspondingly strong advantages. A well governed two tier system to be achieved through innovation in payment infrastructures might be, in turn, more preferable. Regulated competition by new players combined with "traditional" deposits and central bank elements remains essential, although central banks should embrace the technologies underlying cryptocurrencies, because risk payment service providers could move to other currency areas considered to be more appealing for buyers and sellers. Research limitations/implications We do not see specific limitations besides the fact that the following is for sure a broad field of scientific research to be covered, which is at the same time at the origin of ongoing developments and findings. Originality and implications of the paper are, instead, not only represented by its conclusions (which highlight the role of traditional payment instruments and stress why the concept of "money" still has to have specific features) but also by its approach of recent literature's review combined with equally strong logical analytical insights. Practical implications In the light of these considerations, even the role of traditional payment systems like paper money is by far not outdated or cannot be at this point, at least replaced by central bank digital currencies (whose features based on dematerialization despite being issued and guaranteed by a public authority are very different) Social implications No matter which form it might assume is what differentiates economic from barter transactions. This conclusion is by far not tautological or self evident since the notion of money has historically been a great object of scientific discussion. In the light of increasingly modern payment instruments, there is no question that money and the effectiveness of related monetary policies have to be also explored from a social perspective according to different monetary scenarios, ranging from central bank digital currencies to private currencies and cash restrictions/abolition. Originality/value The originality/value of the following article is represented by the fact that it (1) refers to some of the most relevant and recent contributions to this research field, (2) moves from payment systems in general to their newest trends like cryptocurrencies, cash restrictions (or, even, abolition proposals) and monetary policy while (3) combining all elements to reach a common picture. The paper aims at being a comprehensive contribution dealing with "money" in its broadest but also newest sense.
Ansgar Belke Edoardo Beretta
51817233
Central bank digital currencies
Lewis Sun
219719741
A Compendium of Practices for Central Bank Digital Currencies for Multinational Financial Infrastructures
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, we 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. We provide a classification and generic framework for CBDCs and highlight existing DLT platform limitations and use cases in the financial services industry. Overall, our 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, we present a survey on the technical feasibility and challenges of leveraging DLT to issue the selected CBDC experiments surveyed in this paper.
IEEE Access
Edwin Ayisi Opare Kwangjo Kim
221758295
Eggs in One Basket: Security and Convenience of Digital Currencies
Digital currencies store balances in anonymous electronic addresses. We analyze the trade offs between safety and convenience of aggregating balances in addresses, electronic wallets and banks. In our model agents balance the risk of theft of a large account with the cost to safeguarding a large number of passwords of many small accounts. Account custodians (banks, wallets and other payment service providers) have different objectives and tradeoffs on these dimensions; we analyze the welfare effects of differing industry structures and interdependencies, and in particular the consequences of "password aggregation" programs which in effect consolidate risks across accounts.
Charles M Kahn Francisco Rivadeneyra Tsz-Nga Wong
228311704
The Digital Euro and the Role of DLT for Central Bank Digital Currencies
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 of the digitization of the monetary system in particular and the financial system in general in the future.
Manuel Klein Jonas Gross Philipp G Sandner
219528795
Regulating Central Bank Digital Currencies: Towards a Conceptual Framework
Due to technological change and the rise of private digital currencies more and more central banks investigate the possibility of issuing their own Central Bank Digital Currency (CBDC) This paper develops a conceptual framework, which shows how the issuance of CBDC and the provision of access can be regulated. Therefore, theoretical CBDC designs and existing jurisdictions from around the world are considered. The framework points out that the regulation of CBDC encompasses two components: on the one hand, the regulation of the legal form of CBDC. On the other hand, the level of obligation, which indicates how legally binding the issuance and provision of access is for the central bank and potentially involved third parties. Besides, this paper discusses the pros and cons of different regulatory options to find out how CBDC should be regulated. It concludes that only a right to CBDC for everyone is non discriminatory and therefore favorable in the view of consumers. Furthermore, it is favorable to let third parties provide access to CBDC since this potentially increases competition and reduces operational duties for the central bank. While payment service providers are more suitable as third parties for CBDC stored on a central ledger, technical service providers are for CBDC stored on a distributed ledger.
Simon Hess
219322874
Interoperable Payment Systems and the Role of Central Bank Digital Currencies
I explain the meaning of an interoperable payment system and why interoperability is crucial for efficiency. I review some alternative approaches to interoperability, including central bank digital currencies (CBDCs) hybrid CBDCs, and two ledger upgrades of bank based payment systems.
Darrell Duffie