It is not yet clear from the CBDC prototypes outlined so far what their unique selling proposition over existing systems might be. This suggests that the perspective of potential users is largely ignored and CBDC projects risk the failure to assert themselves in the existing payment ecosystem.
Research on central bank digital
currency (CBDC) has gained impressive momentum recently. While the
motivations for issuing retail CBDC are different for advanced and
developing/emerging economies, in both cases CBDC would become part of
the respective existing payment ecosystem. We identify a lack of
systemic analysis that would be necessary to discuss the role of CBDC
within the existing payments ecosystem and the inefficiencies central
banks intend to specifically address. At the same time, it is not yet
clear from the CBDC prototypes outlined so far what their unique selling
proposition over existing systems might be. This suggests that the
perspective of potential users is largely ignored and CBDC projects risk
the failure to assert themselves in the existing payment ecosystem.
This paper provides a systemic analysis of the existing payment
ecosystems in advanced and developing/emerging economies and discusses
CBDC proposals from the perspective of potential unique selling
propositions vis-à-vis existing subsystems.
As a recently updated BIS survey (Boar
and Wehrli 2021) shows, more and more central banks around the world are
engaged in Central Bank Digital Currency (CBDC). According to the
survey, the main motivations of central banks are
- in advanced economies: payments safety/robustness and domestic payments efficiency,
- in developing and emerging economies: financial inclusion is the most important motivation followed also by payment efficiency with a domestic focus.
With this focus on the payment system,
it is surprising that central banks have so far not clearly elaborated
which inefficiencies they intend to specifically address with CBDC. At
the same time, it is not yet clear from the CBDC prototypes outlined so
far, what their unique selling proposition over existing systems might
This shortcoming reflects two
fundamental problems with the CBDC discussion to date. First, there is a
lack of systemic analysis needed to discuss the role of CBDC within the
existing payments ecosystem. Second, the perspective of potential users
is largely ignored. In Bofinger and Haas (2020) we address these issues
by providing a systemic taxonomy of the payment system and an extensive
discussion of different CBDC design options and proposals.
The focus of the following analysis is
on the use of CBDC in developed economies. Nonetheless, the specific
aspects arising for developing and emerging economies are also
2. CBDC for advanced economies
For a systemic analysis of the role of
CBDC in advanced economies, it is useful to first look at the existing
retail payment ecosystem (Figure 1). It consists of several coexisting
subsystems with the commercial bank payment system at its center. The
central role of commercial banks derives from the fact that bank
deposits are the dominant means of settlement for the other subsystems
and that cash can only be generated by withdrawals from a bank deposit.
principle, almost all financial services can be provided by the
commercial bank payment system. The stable coexistence with the other
systems shows that these must have unique selling propositions....
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