The emergence of Central Bank Digital Currencies

Abstract

Stablecoins have been heralded as the future of money on distributed ledgers. As was discussed in the previous chapter, stablecoins purport to mitigate the wild fluctuations that are experienced by cryptocurrencies such as Bitcoin by providing for a one-to-one reserve of a denominated fiat currency that holders can redeem at any time. Yet, despite these built-in mitigating factors, stablecoins have still been plagued by runs and a lack of transparency into their operations. As such, the Central Bank Digital Currency (CBDC) provides an interesting opportunity to see if the digital equivalent of fiat currency can offer increased efficiencies over conventional paper-based currency. 1 Moreover, can these efficiencies be leveraged to other sectors of the economy thereby stimulating more economic growth for all?