A thank you to a reader for passing along the link below to a report from the recent World Economic Forum that discusses policy tools for central banks considering using either a wholesale or retail version of a central bank digital currency.
We continue to see very little change in that arena so far and continue to expect any changes we do see to be slow and gradual in nature.
-------------------------------------------------------------------------------------------------WEF - Central Bank Digital Curreny Policy-Maker Tookkit
Executive summary
"In recent years, central bank digital currency (CBDC), a new form of digitized sovereign currency, has risen to prominence as a policy and operational consideration for many central banks, ministries of finance and other institutions. The intricacies of implementing CBDC are complex and the implications are wide‑reaching. As a result, policy‑makers may find themselves in uncharted waters when attempting to evaluate the potential benefits and trade‑offs associated with CBDC.
The World Economic Forum’s CBDC Policy‑Maker Toolkit seeks to address the need for a concise CBDC decision guide that provides comprehensive and risk‑aware information to policy‑makers. This document serves as a possible framework to ensure that any CBDC deployment fully considers the costs as well as the potential benefits, appraising a multitude of risks and evaluating deployment and governance strategies, alternative solutions and other salient factors. Notably, it is not exhaustive, and instead intends to serve as a complement to additional research that any policy‑maker considering CBDC should conduct.
The CBDC Policy‑Maker Toolkit provides high‑level guidance and information for:
– Retail, wholesale, cross-border CBDC and alternatives in private money such as “hybrid CBDC”
– Large, small, emerging and developed countries."
. . . .
"As policy‑makers navigate this process, they should consider how CBDC may introduce new capabilities that support regulatory goals while also introducing new risks or compliance vulnerabilities. CBDC could potentially be used as a tool to achieve policy objectives such as improved safety and resilience in payments systems; increased efficiency, access and competitiveness of payments systems; better data transmission and reporting to central banks; and financial inclusion. The achievement of these goals with CBDC must be evaluated in the full context of the associated trade‑offs and risks that CBDC may entail."
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My added comment: I noticed this note from page 19 of the report linked above regarding the future of cash. I added the bold underline below for additional emphasis:
"Physical cash, particularly small banknotes, guarantees financial inclusion more than any other means of payment. Cash serves as a last‑resort means of payment and store of value in the event of payment‑system shocks and failures. For many, it is also their primary means of payment and savings. The central bank should not develop policies that remove small banknotes from retail use until a fully reliable alternative is available to all members of the population, which may not be possible." (see page 19)
Once again, for those expecting cash to disappear any time soon, I see nothing on the immediate horizon that suggests that to be the case for the reasons noted above and others that various central banks have cited including the US Federal Reserve.
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Added note: The Bank for International Settlements (BIS) produces this press release on CBDC news:
Central Bank Group to Assess Potential for CBDC's
"The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Sveriges Riksbank and the Swiss National Bank, together with the Bank for International Settlements (BIS), have created a group to share experiences as they assess the potential cases for central bank digital currency (CBDC) in their home jurisdictions.
The group will assess CBDC use cases; economic, functional and technical design choices, including cross-border interoperability; and the sharing of knowledge on emerging technologies. It will closely coordinate with the relevant institutions and forums - in particular, the Financial Stability Board and the Committee on Payments and Market Infrastructures (CPMI).
The group will be co-chaired by Benoît Cœuré, Head of the BIS Innovation Hub, and Jon Cunliffe, Deputy Governor of the Bank of England and Chair of the CPMI. It will include senior representatives of the participating institutions."
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