Technology Approach for a CBDC

Shah, Dinesh; Arora, Rakesh C.; Du, Hongwu; Darbha, Sriram; Miedema, John; Minwalla, Cyrus

doi:10.34989/san-2020-6

Cited by 2 publications

(1 citation statement)

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“…62 Even though a common transaction has the possibility of being conducted offline, interest-bearing CBDC implementation can only be executed online. 63 Furthermore, limited internet coverage could reduce the effectiveness of monetary policy due to limited policy coverage areas. 64 III.A.2.iv.…”

Section: Iiia2iii Internet Coverage Limitationmentioning

confidence: 99%

Optimal Central Bank Digital Currency Design for Emerging Economies

Syarifuddin

2024

j. cent. bank. law and inst.

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The growth of digitalisation presents the possibility for Central Bank Digital Currency (CBDC) to emerge as a secure and efficient payment method. However, despite the benefits, CBDC implementation needs to be adapted to the capabilities and needs of each country. This study uses meta-strength, weakness, opportunity, and threat (meta-SWOT) analysis to assess the internal strengths and weaknesses, as well as the external opportunities and threats, to determine the most optimal CBDC design for emerging economies. In analysing internal aspects, CBDC allows for an efficient payment system, followed by a more effective monetary policy. Furthermore, the technology creates the possibility to boost financial inclusion and trace many illicit activities. However, to achieve that, high investment costs and privacy issues must be accommodated, followed by technological risks such as the digital divide and electrical outages. Turning to external aspects, growing technology, the network effect, enthusiasm for CBDC, and the impracticality of cash usage have become catalysts for CBDC development. Despite these opportunities, central banks should be wary of the threat of cyberattacks, quickening bank disintermediation, legal issues within their respective countries, and competition with private crypto companies. Altogether, the most optimal CBDC design in emerging economies is retail and wholesale coverage, interest-bearing (wholesale) and noninterest-bearing (retail) remuneration, account-based and token-based paymentsystems, a traceable degree of anonymity, hybrid architecture, a Decentralised Ledger Technology (DLT) ledger system, and domestic and cross-border scope. These results are supported by rigorous examination of global CBDC research and development.

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Section: Iiia2iii Internet Coverage Limitationmentioning

confidence: 99%

Optimal Central Bank Digital Currency Design for Emerging Economies

Syarifuddin

2024

j. cent. bank. law and inst.

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The Macroeconomic Effects of an Interest-Bearing CBDC: A DSGE Model

Syarifuddin

Bakhtiar

2022

Mathematics

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We develop a medium size dynamic stochastic general equilibrium (DSGE) model to assess the macroeconomic consequences of introducing an interest-bearing central bank digital currency (CBDC), an electronic alternative of payment with public use properties of cash and that can furnish as bank settlement balances. The model consists of seven sectors, namely households, retail firms, wholesale firms, capital producing firms, commercial banks, central bank, and government, and offers rich features. The use of cash and CBDC is differentiated with respect to their prices and transaction costs. In particular, we quantify the effects of negative shock on CBDC transaction cost to evaluate the potential of CBDC as an alternate instrument in liquidity holding in addition to cash and bank deposits. We also examine the effects of productivity shock and monetary policy shock on CBDC interest rate and CBDC demand, and their interaction with other main variables of the model.

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Technology Approach for a CBDC

Cited by 2 publications

References 0 publications

Optimal Central Bank Digital Currency Design for Emerging Economies

Optimal Central Bank Digital Currency Design for Emerging Economies

The Macroeconomic Effects of an Interest-Bearing CBDC: A DSGE Model

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