The Future of Money: CBDC

Our monetary system is being disrupted. Cryptocurrencies allow fast settlement, cross-border transactions for anyone with an internet connection and a mobile phone. Crypto and Decentralized Finance (Defi) offer great opportunities and risks. Governments are responding with regulations and a "crypto-like" alternative: Central Bank Digital Currencies (CBDCs).

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Transcript

1. Future of Money: CBDCs
   J Scott Christianson
   

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2. “Interbank payment systems such as SWIFT
   are old, inflexible, slow, and increasingly
   prone to cyberattacks at a time when banks
   are under tremendous pressure to cut costs
   and protect customer data from hackers,
   which blockchain could achieve,”
   

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3. CENTRAL BANK DIGITAL CURRENCIES
   (CBDCs)
   A digital currency is issued and backed by a
   central bank, considered legal tender, and
   pegged against a fiat currency.
   

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4. CENTRAL BANK DIGITAL CURRENCIES (CBDCs)
   • These are NOT cryptocurrencies but are digital dollars that
   exhibit some of the same features of cryptocurrencies.
   
   • Models include:
   
   • Wholesale: Issued by the central bank to banks (bank-to-
   bank transactions)
   
   • Retail: Issued by the central bank to the general public.
   •
   

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5. Retail: Direct
   

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6. Retail: Hybrid
   

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7. Retail: Hybrid
   

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8. Speeches on CBDCs have turned more positive since late 2018
   Source: R Auer, G Cornelli and J Frost (2020), “Rise of the central bank digital currencies: drivers, approaches and technologies”, BIS working papers, No 880,
   Number of speeches
   80
   60
   40
   20
   0
   –20
   –40
   2021
   2020
   2019
   2018
   2017
   2016
   Cumulative count of speeches:
   Retail CBDC
   Wholesale CBDC
   Positive stance: Negative stance: Net, positive–negative
   Speeches on CBDCs have turned more positive since late 2018
   Source: R Auer, G Cornelli and J Frost (2020), “Rise of the central bank digital currencies:
   drivers, approaches and technologies”, BIS working papers, No 880,
   

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9. CBDC research and pilots around the globe
   Source: R Auer, G Cornelli and J Frost (2020), “Rise of the central bank digital currencies:
   drivers, approaches and technologies”, BIS working papers, No 880,
   2
   CBDCs research and pilots around the globe: a stock take
   • Draw on R Auer, G Cornelli and J Frost (2020), “Rise of the central bank digital currencies:
   drivers, approaches and technologies”, BIS Working Papers, No 880 (link to the data)
   BS = The Bahamas; ECCB = Eastern Caribbean Central Bank; HK = Hong Kong SAR; JM = Jamaica; SG = Singapore. The use of this map does not constitute, and should not be
   construed as constituting, an expression of a position by the BIS regarding the legal status of, or sovereignty of any territory or its authorities, to the delimitation of
   international frontiers and boundaries and/or to the name and designation of any territory, city or area.
   Source: R Auer, G Cornelli and J Frost, “Rise of the central bank digital currencies: drivers, approaches and technologies”, BIS Working Paper, no 880, August 2020.
   BS
   HK
   JM
   SG
   ECCB
   Live retail CBDC
   Retail pilot ongoing
   Retail pilot completed
   Retail research
   Retail research and wholesale project
   Wholesale project
   N/A
   Project phase:
   

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10. “CBDCs now seem a matter of when, not if”
    Claire Jones, Financial Times.
    Gillian Tett, Financial Times.
    “The Fed’s digital currency could displace crypto”
    

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11. What could we do with CBDCs
    that we can't do with today's
    dollars?
    

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13. Airdrop money into wallets
    

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14. Create money where it will be used
    

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16. Money with an Expiration Date
    

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17. Welcome to the world of
    programable money.
    

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19. Real-time economic data
    

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20. Public Ledgers = Public Knowledge
    

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21. Transparency in Government/Non-profit/Education
    Internal-use-only stablecoin
    • J Scott Christianson
    

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23. Public Ledgers = Public Knowledge
    

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27. Fuse of Monetary and Social
    Policy
    

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29. Fuse of Monetary, Geopolitical,
    and Trade Policy
    

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30. Predictions
    • The momentum of crypto will carry it forward regardless of
    government regulation or fundamentals. Remember that
    momentum often beats fundamentals. Bitcoin might not be around
    in 5 years, but something will. I suspect Ethereum or Cardano.
    
    • Innovation and accelerated deployment of CBDCs will happen in
    countries without good monetary systems and in countries with
    authoritarian governments or with leaders with authoritarian
    aspirations.
    
    • Erdoğan and his ilk will be first in line to fuse social control with
    monetary control, assuming they can find a means to hide their
    own corrupt dealings.
    

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31. Predictions
    • The US and the EU will be slow to adopt CBDCs due to
    entrenched interests (i.e. our friends in the banking industry).
    CBDCs in these locations will be unlikely to have some of the
    most interesting features.
    
    • In the US and EU CBDCs will used as an argument for
    regulating cryptocurrencies.
    
    • The drive to displace the US dollar as the world’s de facto
    currency will grow quickly, with China leading the way. China will
    use CBDCs to fuse foreign and monetary policy via Belt and
    Road partners and force them to use digital Renminbi, reducing
    the use of US Dollars and Euros.
    

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