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Central Bank Digital Currencies: A Framework for Assessing Why and How

Author

Listed:
  • Ben Fung
  • Hanna Halaburda

Abstract

Digital currencies have attracted strong interest in recent years and have the potential to become widely adopted for use in making payments. Public authorities and central banks around the world are closely monitoring developments in digital currencies and studying their implications for the economy, the financial system and central banks. One key policy question for public authorities such as a central bank is whether or not to issue its own digital currency that can be used by the general public to make payments. There are several public policy arguments for a central-bank-issued digital currency. This paper proposes a framework for assessing why a central bank should consider issuing a digital currency and how to implement it to improve the efficiency of the retail payment system.

Suggested Citation

  • Ben Fung & Hanna Halaburda, 2016. "Central Bank Digital Currencies: A Framework for Assessing Why and How," Discussion Papers 16-22, Bank of Canada.
  • Handle: RePEc:bca:bocadp:16-22
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    References listed on IDEAS

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    1. Freedman, Charles, 2000. "Monetary Policy Implementation: Past, Present and Future--Will Electronic Money Lead to the Eventual Demise of Central Banking?," International Finance, Wiley Blackwell, vol. 3(2), pages 211-227, July.
    2. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
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    4. Wilko Bolt & Maarten van Oordt, 2016. "On the value of virtual currencies," DNB Working Papers 521, Netherlands Central Bank, Research Department.
    5. Hanna Halaburda & Mikolaj Jan Piskorski, 2010. "When Should a Platform Give People Fewer Choices and Charge More for Them?," Antitrust Chronicle, Competition Policy International, vol. 7.
    6. Jonathan Chiu & Tsz-Nga Wong, 2015. "On the Essentiality of E-Money," Staff Working Papers 15-43, Bank of Canada.
    7. Ben Fung & Miguel Molico & Gerald Stuber, 2014. "Electronic Money and Payments: Recent Developments and Issues," Discussion Papers 14-2, Bank of Canada.
    8. Ben Fung & Scott Hendry & Warren E. Weber, 2017. "Canadian Bank Notes and Dominion Notes: Lessons for Digital Currencies," Staff Working Papers 17-5, Bank of Canada.
    9. Hanna Halaburda & Mikolaj Jan Piskorski, 2010. "Competing by Restricting Choice: The Case of Search Platforms," Harvard Business School Working Papers 10-098, Harvard Business School, revised Jan 2013.
    10. Sébastien LOTZ & Guillaume ROCHETEAU, 2000. "Launching of a New Currency in a Simple Random Matching Model," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 00.10, Université de Lausanne, Faculté des HEC, DEEP.
    11. Barrdear, John & Kumhof, Michael, 2016. "The macroeconomics of central bank issued digital currencies," Bank of England working papers 605, Bank of England.
    12. Selgin, George A, 1994. "On Ensuring the Acceptability of a New Fiat Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(4), pages 808-826, November.
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    Citations

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    Cited by:

    1. Andreas Hanl, 2018. "Some Insights into the Development of Cryptocurrencies," MAGKS Papers on Economics 201804, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    2. Pablo Furche & Carlos Madeira & Mario Marcel & Carlos Medel, 2017. "FinTech and the Future of Central Banking," Economic Policy Papers Central Bank of Chile 63, Central Bank of Chile.
    3. repec:nzb:nzbbul:apr2018:3 is not listed on IDEAS
    4. Meyer Aaron & Francisco Rivadeneyra & Samantha Sohal, 2017. "Fintech: Is This Time Different? A Framework for Assessing Risks and Opportunities for Central Banks," Discussion Papers 17-10, Bank of Canada.
    5. Michael D. Bordo & Andrew T. Levin, 2017. "Central Bank Digital Currency and the Future of Monetary Policy," NBER Working Papers 23711, National Bureau of Economic Research, Inc.
    6. Walter Engert & Ben Fung, 2017. "Central Bank Digital Currency: Motivations and Implications," Discussion Papers 17-16, Bank of Canada.
    7. repec:cpt:journl:v::y:2017:i:148:p:39-78 is not listed on IDEAS

    More about this item

    Keywords

    Digital Currencies; Financial services; Payment clearing and settlement systems;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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