3 ms·

What do you mean by 'this'? The paper talks about 7 different models of CDBC. To which does your comment relate?

XorNot 5y ago
The core question? Why would the Federal Reserve, or any other central bank, need to create a "digital" currency when it manages the real currency via it's own clearing accounts? Most money in developed economies is not actually physically existent currency - it is already digital, the question is whether you can access the banking services as a participant. In the case of Central Banks, the issue is that it is not possible to bank through them as a regular consumer. This is, very much, an issue which should be solved: basic banking services access is a big problem for low income people. But it's not remotely clear why the concept of "digital currency" starts to get involved at all: this is an identical situation to regular banking and online payments, nothing is fundamentally different - the entity involved is already literally the arbitrator and source of truth of how much currency exists.
- rahimnathwani 5y ago
  #1 because the only way regular people can hold central bank money (as distinct from retail bank liabilities) is cash. And cash isn't convenient for most transactions. #2 Yes, most money is digital. But most of that money is NOT central bank money. Imagine you 'have' $500k in the form of digital money. How much of that will you still have if your bank goes bust? #3 Yes, this can be solved in a different way (as it has been in the UK). #4 Regular banking and online payments are built on legacy payment rails. Transactions between customers of different banks are slow or expensive or both. A CDBC does not need to use distributed ledger technology. Depending on your objectives, it could be 'just a database'. But that's the point: people are still trying to work out what those objectives are. Perhaps privacy and anonymity is an objective. Perhaps the opposite (all transactions can be tracked back to an individual) is an objective. Those objectives (and competitive forces) will determine how a CDBC is implemented. "the entity involved is already literally the arbitrator and source of truth of how much currency exists" Yes, but it might simultaneously want to increase transparency. How do you know the central bank is truthfully reporting M1? Could a distributed ledger help?

The core question? Why would the Federal Reserve, or any other central bank, need to create a "digital" currency when it manages the real currency via it's own clearing accounts? Most money in developed economies is not actually physically existent currency - it is already digital, the question is whether you can access the banking services as a participant. In the case of Central Banks, the issue is that it is not possible to bank through them as a regular consumer. This is, very much, an issue which should be solved: basic banking services access is a big problem for low income people. But it's not remotely clear why the concept of "digital currency" starts to get involved at all: this is an identical situation to regular banking and online payments, nothing is fundamentally different - the entity involved is already literally the arbitrator and source of truth of how much currency exists.

rahimnathwani 5y ago
#1 because the only way regular people can hold central bank money (as distinct from retail bank liabilities) is cash. And cash isn't convenient for most transactions. #2 Yes, most money is digital. But most of that money is NOT central bank money. Imagine you 'have' $500k in the form of digital money. How much of that will you still have if your bank goes bust? #3 Yes, this can be solved in a different way (as it has been in the UK). #4 Regular banking and online payments are built on legacy payment rails. Transactions between customers of different banks are slow or expensive or both. A CDBC does not need to use distributed ledger technology. Depending on your objectives, it could be 'just a database'. But that's the point: people are still trying to work out what those objectives are. Perhaps privacy and anonymity is an objective. Perhaps the opposite (all transactions can be tracked back to an individual) is an objective. Those objectives (and competitive forces) will determine how a CDBC is implemented. "the entity involved is already literally the arbitrator and source of truth of how much currency exists" Yes, but it might simultaneously want to increase transparency. How do you know the central bank is truthfully reporting M1? Could a distributed ledger help?