Central Bank Digital Currencies. Implementation & Impacts

Banking in the digital age/ 1

Central Bank Digital Currencies.

Implementation & impacts Fundaciรณn Rafael del Pino, 2018 Jorge Sicillia BBVA

Central Bank Digital Currency

Central Bank Digital Currency based on DLTs

Three features of cash:

Four CBDC schemes ...

1

To Improve interbank settlement Digital Clients

2

19.1 overall Mill To improve the payment system Mar-17

Zero Yield

3

% To developPenetration a new monetary policy tool to overcome zerobound interest rates

4

To increase surveillance and/or reduce systemic financial risk 2

Central Bank Digital Currency

Four Central Bank Digital Currency schemes

Universal Access

1

CBDC to improve interbank settlement

2

CBDC to improve overall payment system

3

CBDC as new policy tool

4

CBDC as CB deposit

Anonymity

Zero Yield

3

Central Bank Digital Currency

Expected outcomes of four CBDC schemes

Interbank settlement

Payment system

New policy tool

CB Deposit

1

2

3

4

Improved efficiency Lowering management costs Increasing competition

Improved efficiency

Getting rid of the zero lower bound

Financial stability and lower informality

Risk on CB Infrastructure

Cash is either banned or abandoned

Control against illegal markets

Risk to increase informality Impact on international flows

Financial repression Legitimacy issues

Credit might be extremely reduced Questionable role for CB if they redirect funds to the financial system 4

Conclusions We consider it likely that a CBDC will be adopted by at least some CBs over the next few years.

The less disruptive scenarios (especially the first) are more likely, because of their ease of implementation and less uncertainty about their impact Additional research and debate is needed in order to understand CBDC and make it a good policy option for example in the EM environment.

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ANNEXES

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Central Bank Digital Currency

For further information...

https://www.bbvaresearch.com/wp-content/ uploads/2017/09/WP_CBDC_mod.pdf

https://www.bbvaresearch.com/wp-content/ uploads/2018/04/CBDCs-in-LATAM.pdf 7