Tag Archives: Central bank digital currency

Chapter 5 in the CEPR eBook, November 24, 2021. HTML. From the conclusion: From a macroeconomic perspective, central banks can largely neutralise the consequences of CBDC. What is highly uncertain, however, is whether they would choose to do so – the political risks of ‘Reserves for All’ are first-order. The decision for or against CBDC thus should not only reflect the assessment of economic trade-offs, but also whether societies are confident in their ability to efficiently manage...

CEPR eBook, November 24, 2021. HTML. VoxEU, November 24, 2021. HTML. Retail central bank digital currency has morphed from an obscure fascination of technophiles and monetary theorists into a major preoccupation of central bankers. Pilot projects abound and research on the topic has exploded as private sector initiatives such as Libra/Diem have focused policymakers’ minds and taken the status quo option off the table. In this eBook, academics and policymakers review what we know...

The Economist reports on “The race to redefine cross-border finance:” SWIFT recently launched SWIFT Go for retail payments. FinTech firms often partly bypass SWIFT by aggregating payments first. Ripple evades SWIFT, using a cryptocurrency for international transactions. Credit card companies build infrastructure independent of SWIFT for retail (push) payments initiated by the sender. JPMorgan Chase and a Singaporean bank and Temasek launched Partior for wholesale payments. This...

NZZ, August 10, 2021. PDF (title changed by NZZ). Should the SNB follow the Fed and the ECB and rework its strategy? There is a case for rethinking the broad inflation target, the monetary policy concept, and the communication strategy. Equally important is a strategy review outside of the SNB: The SNB cannot and must not decide about the framework within which it operates. Conclusion: Daher ist eine Strategieüberprüfung inner- und ausserhalb der SNB sinnvoll....

NZZ, August 10, 2021. PDF (title changed by NZZ). Should the SNB follow the Fed and the ECB and rework its strategy? There is a case for rethinking the broad inflation target, the monetary policy concept, and the communication strategy. Equally important is a strategy review outside of the SNB: The SNB cannot and must not decide about the framework within which it operates. Conclusion: Daher ist eine Strategieüberprüfung inner- und ausserhalb der SNB sinnvoll. Geldpolitisch...

In his University of St. Gallen MA thesis entitled “CBDC with Collateralized Pass-Through Funding,” Bastian Wetzel assesses how strongly banks would be affected by deposit outflows into retail CBDC: The results of the study show that 92.7 percent of all sight deposits in the aggregate Swiss banking sector are covered by excess liquidity and eligible assets, whereas sight deposits held in CHF are covered by over 100 percent. Therefore, the collateral constraint seems to be a problem...

In the FAZ, Christian Siedenbiedel reports that Deutsche Bank questions whether a digital Euro as envisioned by the ECB (i.e., with tight quantity restrictions) would be successful: Die Argumentation geht so: Die EZB will den digitalen Euro einführen, um auf den verstärkten Währungswettbewerb zu antworten. … Um sich vor solchem Machtverlust sowohl durch Digitalgeld von anderen Notenbanken („Krypto-Dollars“) als auch durch privates Digitalgeld („Global Stable Coins“) zu schützen,...

In a new working paper the Swiss Bankers Association identifies challenges for banks. Nevertheless it argues that [a]ny conclusion that the status quo is the least risky option seems premature and shortsighted. … The introduction of digital currencies and design questions regarding payment methods and infrastructure represent strategic business as well as political challenges on which public authorities and business must take a productive position. An informed discussion on the...

VoxEU, February 5, 2021. HTML. Based on CEPR DP 15457, I assess possible implications of the introduction of retail CBDC for bank profits. The model implies annual implicit subsidies to U.S. banks of up to 0.8 percent of GDP during the period 1999-2017.

Writing about CBDC, John Cochrane makes it clear that he is in favor. He links to my work and writes Dirk Niepelt has written a lot about CBDC theory, including reserves for all in 2015, a recent Vox-EU summary and papers,  here with Markus Brunnermeier a JME paper “CBDC coupled with central bank pass-through funding need not imply a credit crunch nor undermine financial stability,” a follow up including “The model implies annual implicit subsidies to U.S. banks of up to 0.8 percent...