For technical and regulatory reasons, CBDC is unlikely to replicate the properties of physical cash – making it all the more important to preserve the latter. CBDC has begun as a technical discussion; now is the time to acknowledge its political dimension and correspondingly initiate a transparent decision process that involves society at large.
Read MoreCBDC could naturally lead to a bottom-up full reserve banking system where money creation is an exclusive privilege of the state. Creeping centralisation would eventually spill over to the real economy as well, accidentally resulting in an economic system with suboptimal allocation of resources according to political agendas.
Read MoreCBDC gaining meaningful market share expands the central bank's grip over the monetary system, with significant implications for bank balance sheets, financial risk, and commercial bank funding. During a financial crisis, CBDC may become a flight-to-safety instrument and exacerbate the magnitude of bank runs, causing broader systemic instability.
Read MoreThe second post in the CBDC series explores the inner workings of our current monetary system to better contextualise where a retail CBDC would fit in. We discuss the different forms of the euro, the hierarchy of money, the illusion of fungibility, and the important role of private credit as a decentralised money management tool.
Read MoreThe ECB has published a new report on a potential CBDC called ‘digital euro’. As part of a short series, this blog post explores what CBDC is really about – and what it’s not.
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