Designing Central Bank Digital Currency for Indonesia: The Delphi–analytic Network Process

Abstract

The emergence of stablecoins is a growing concern for authorities worldwide including Indonesia as it could affect financial stability. Thus, if a central bank chooses to develop a central bank digital currency (CBDC) to tackle this problem, the design should conform to the country’s characteristics and consumer needs. This study draws on experts’ opinions from various economic agents and utilises an amalgamation of the analytic network process (ANP) and the Delphi method to show that the cash-like CBDC model is the most appropriate digital currency design for Indonesia, since it could enhance financial inclusion and reduce shadow banking in Indonesia.

The Effects of Central Bank Digital Currencies News on Financial Markets

“…Our empirical findings indicate CBDC indices have a significant positive relationship with the volatility of VIX but conversely have a negative one with that of USEPU. These findings are consistent with the views of Larina and Akimov (2020), who believe that the CBDCs are conductive to reducing systemic financial risk, and also reconfirm the notions that CBDCs positively impact the consumer friendly (Larina and Akimov, 2020); financial stability [Zams et al, 2020;Copeland, 2020;McLaughlin, 2021;Buckley et al, 2021]; welfare gains (Davoodalhosseini, 2021); economic growth rate (Tong and Jiayou, 2021); the ability of central bank's to stabilise the business cycle (Barrdear and Kumhof, 2021). First, one possible explanation behind the latter case concerns the 'stablecoin' characteristic of CBDCs because the substitution effect of the CBDCs on bank deposits is limited, and the overall economic effect is positive.…”

“…Many regulators and researchers regard a CBDC as a nationally issued 'tablecoin', and believe it can balance the banking system (Sissoko, 2020) and positively impacts financial stability [Larina and Akimov, 2020;Copeland, 2020;McLaughlin, 2021;Buckley et al, 2021]. Indeed, Zams et al (2020), using an analytic network process and the Delphi method, demonstrated that the cash-like CBDCs model is the most suitable CBDCs design for Indonesia because it can improve financial inclusion and reduce shadow banking. Tong and Jiayou (2021) investigated the effects of the issuance of digital currency/electronic payment on economics based on a four-sector DSGE model, and conclude that CBDCs can mitigate the leverage ratio and the systemic financial risk.…”

“…Furthermore, some discussions have centred around the new role of central banks in the digital currency era. Some scholars believe that CBDCs can upset commercial banking because central banks are more stable and can play an essential role in reducing risks in economic transactions [Yamaoka, 2019;Zams et al, 2020;Sinelnikova-Muryleva, 2020]. This could possibly even lead to commercial banking panic (Williamson, 2021) or allow central banks to become deposit monopolists (Fernández-Villaverde et al, 2021).…”

“…Moreover, capital flow information can be fully and quickly investigated, thereby aiding anti-corruption, anti-money laundering, anti-terrorist financing, and anti-tax evasion efforts [Tronnier, 2021;Dupuis et al, 2021]. Third, CBDCs have the potential to promote financial market stability by adjusting monetary, mitigating financial systemic risk, reducing shadow banking, among others [Larina and Akimov, 2020;Copeland, 2020;Zams et al, 2020].…”

Restrictions on the Emission of a Digital Currency in a Central Reserve Bank for Minor Transactions

“…According to Lee, Yan, and Wang (2021) Central Bank Digital Currency will serve as the main tool in the future digital economy and countries familiar with the technology will have a competitive advantage considering its implementation and current regulation. Zams et al (2020) found that the optimal central bank digital currency implementation model for Indonesia should be similar to cash, a central bank digital currency for retail transactions should have the same characteristics as traditional paper money in the sense of being universal, anonymous and being a medium of exchange and not a medium of performance similar to the models implemented by the People's Bank of China which uses a technology similar to that of Indonesia. Fernandez (2021) highlighted that the European Central Bank approved the issuance of a digital euro in a response to the rising interest in digital currencies and to take into consideration a new economic management and control mechanism.…”