Central Bank Digital Currency: Considerations, Projects, Outlook

Edited by Dirk NiepeltCentral Bank Digital Currency: Considerations, Projects, OutlookWithin a few years, retail central bank digital currency (CBDC) 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 the economic, legal and political implications of CBDC; they discuss current projects; and they look ahead. While consensus on the ‘right’ CBDC choices remains elusive, common perspectives begin to emerge. First, money, banking and payments are ripe for upheaval, with or without CBDC. Second, the key risk of CBDC is unlikely to be bank disintermediation – privacy, information more generally, and politics may be more critical. Third, the use case for CBDC must be clarified, country by country. It may not exist, because of alternative, better solutions to the existing problems. And fourth, as the implications of CBDC go far beyond the remit of central banks, parliaments and voters should have the final say.9 781912 179541ISBN 978-1-912179-54-1ISBN: 978-1-912179-54-1Central Bank Digital Currency: Considerations, Projects, Outlook Central Bank Digital CurrencyConsiderations, Projects, Outlook CEPR PRESSCentre for Economic Policy Research33 Great Sutton StreetLondon, EC1V 0DXUKTel: +44 (0)20 7183 8801Email: cepr@cepr.orgWeb: www.cepr.org ISBN:Copyright © CEPR Press, 2021. Central Bank Digital CurrencyConsiderations, Projects, Outlook Edited by Dirk Niepelt CENTRE FOR ECONOMIC POLICY RESEARCH (CEPR)The Centre for Economic Policy Research (CEPR) is a network of over 1,600 research economists based mostly in European universities. The Centre’s goal is twofold: to promote world-class research, and to get the policy-relevant results into the hands of key decision-makers.CEPR’s guiding principle is ‘Research excellence with policy relevance’.A registered charity since it was founded in 1983, CEPR is independent of all public and private interest groups. It takes no institutional stand on economic policy matters and its core funding comes from its Institutional Members and sales of publications. Because it draws on such a large network of researchers, its output reflects a broad spectrum of individual viewpoints as well as perspectives drawn from civil society.CEPR research may include views on policy, but the Trustees of the Centre do not give prior review to its publications. The opinions expressed in this report are those of the authors and not those of CEPR.Chair of the Board Sir Charlie BeanFounder and Honorary President Richard PortesPresident Beatrice Weder di MauroVice Presidents Maristella Botticini Ugo Panizza Philippe Martin Hélène ReyChief Executive Officer Tessa Ogden ContentsForeword viiIntroduction 1Dirk NiepeltPart I: ConsiderationsCentral bank digital currency, bank intermediation and payments 9Jonathan Chiu and Francisco RivadeneyraInformation, privacy and central bank digital currency 17Todd Keister and Cyril MonnetCentral bank digital currencies and data in the digital age: A triple imperative 23Raphael Auer, Sebastian Doerr, Jon Frost, Leonardo Gambacorta and Hyun Song ShinThe right and duty of central banks to issue retail digital currency 31Corinne Zellweger-Gutknecht‘Reserves for All:’ Political rather than macroeconomic risks 39Dirk NiepeltFacing the central bank digital currency trilemma 45Linda Schilling, Jesús Fernández-Villaverde and Harald UhligCan central bank digital currency transform digital payments? 51Antonio FatasCentral bank digital currency: Is it really worth the risk? 57Stephen G. Cecchetti and Kermit L. SchoenholtzCentral bank digital currency, FinTech and private money creation 65Markus Brunnermeier and Jonathan PayneHow will digital money impact the international monetary system? 73Tobias Adrian and Tommaso Mancini-GriffoliStablecoins as alternatives for central bank digital currency? 81Quentin Vandeweyer Part II: ProjectsAn overview of the Bank of Canada CBDC project 89Jonathan Chiu and Francisco RivadeneyraThe role of central banks when cash is no longer king: Perspectives from Sweden 99Martin Flodén and Björn SegendorfThe Eurosystem’s digital euro project: Preparing for a digital future 111Katrin Assenmacher and Ulrich BindseilCentral ban