The Future of Central Banking

Compared to the history of money and banking, the history of central banking is fairly brief and has been influenced by the development of modern nation states, by the economic environment and by technological advances. Accordingly, on-going innovations in digital technologies and the globalization of the economy are expected to have significant impacts on central banking in the future. Since all the core activities of central banking, such as the issuance of money, the operation of settlement systems, its function as lender of last resort and its monetary policy, are based upon “trust”, its history has been, and its future will also be, closely linked to the most efficient framework in terms of building trust and reflecting changing technological and institutional conditions. Even though digital innovation may influence the styles of central banks in the future, the relevance and effectiveness of their payment and settlement infrastructures, their function as lenders of last resort and their monetary policies will be maintained. Besides, the need for risk-free central bank money will remain strong on account of its capacity to reduce risks in economic transactions, and central banks will have to continue making efforts to meet these demands through the enhancement of the utility of their infrastructure, including real-time gross settlement systems. Regarding central bank digital currencies, many issues require further examination. The future of central banking will be closely interlinked with that of nation states and depends on its capacity to identify the ideal mode of utilizing information and data in the economy.