Blockchain Papers

Biagio Bossone

No abstract is available for this record.

Daniel Kaneda

No abstract is available for this record.

Agisilaos Papadogiannis

No abstract is available for this record.

Alexander Baker

No abstract is available for this record.

Candauda Arachchige Saliya

No abstract is available for this record.

Bruno Biais, Jean Rochet, Stéphane Villeneuve

No abstract is available for this record.

Richard Yifan Zhou

No abstract is available for this record.

Muhammad Danish Khan Jumain, Abdul Hafizh Mohd Azam

Bitcoin is a new asset class in the global financial system where it is known as cryptocurrency or digital currency. Bitcoin has begun to gain the world’s attention as the price of Bitcoin has been rising since 2009 as its usage increases day by day. The popularity of bitcoin has made some investors see it as a safe place. But is this true for the ASEAN-5 currencies? Therefore, this research paper aims to identify whether Bitcoin can act as a hedge for currencies in the ASEAN-5 countries namely Malaysia, Thailand, Indonesia, Singapore and the Philippines. This study uses daily data from December 1, 2014 until December 30, 2022. Empirical results of the study based on the GARCH (1,1) model show that Bitcoin can serve as a weak hedge for the ASEAN- 5 currencies except for Singapore where there is evidence of a strong hedge in the Lion City. This is particularly due to a unique Singapore's monetary policy tools which are based on their exchange rate unlike with other countries that mainly use interest rate as their tool.

Jaemin Son, Doojin Ryu

No abstract is available for this record.

Kamil Golacik

Motivation: This paper addresses the ongoing debate surrounding Bitcoin’s potential to function as an alternative to state-issued fiat currencies. With the advent of Bitcoin and its increasing global prominence, it is essential to explore its viability, particularly in light of its formal adoption in El Salvador as legal tender. The limited supply and decentralized nature of Bitcoin present a significant departure from traditional monetary systems, which raises questions regarding its capacity to fulfill the roles of money under Modern Monetary Theory (MMT).Aim: The primary goal of this paper is to critically examine whether Bitcoin can serve as a functional replacement for fiat money. Using a post-Keynesian analytical framework, this study investigates Bitcoin’s ability to meet the requirements of sovereign money, particularly within the theoretical framework of MMT. The analysis focuses on Bitcoin’s decentralized issuance, limited supply, and its role in fiscal policy and credit creation.Materials and methods: This research employs a critical literature review and a case study analysis, using the framework of MMT and post-Keynesian endogenous money theory to assess Bitcoin’s economic implications and its real-world application in El Salvador’s Bitcoin Law. The study analyzes Bitcoin’s economic implications based on the endogenous money supply model and evaluates its impact on government fiscal policy, credit markets, and economic stability in both theoretical and practical contexts, with a special focus on El Salvador’s Bitcoin Law.Results: The analysis reveals significant limitations in Bitcoin’s ability to function as a fiat currency. Its rigid supply and speculative nature hinder its capacity to serve as a medium of exchange, store of value, and unit of account, as envisaged by MMT. The study concludes that Bitcoin’s decentralized nature and deflationary design pose challenges for its broader adoption as state money, particularly in managing aggregate demand and economic crises.

Shuzheng Wang, Yue Huang, Wenqin Zhang, Yuming Huang · 6 authors

Ethereum, as a representative of Web3, adopts a novel framework called Proposer Builder Separation (PBS) to prevent the centralization of block profits in the hands of institutional Ethereum stakers. Introducing builders to generate blocks based on public transactions, PBS aims to ensure that block profits are distributed among all stakers. Through the auction among builders, only one will win the block in each slot. Ideally, the equilibrium strategy of builders under public information would lead them to bid all block profits. However, builders are now capable of extracting profits from private order flows. In this paper, we explore the effect of PBS with private order flows. Specifically, we propose the asymmetry auction model of MEV-Boost auction. Moreover, we conduct empirical study on Ethereum blocks from January 2023 to May 2024. Our analysis indicates that private order flows contribute to 54.59% of the block value, indicating that different builders will build blocks with different valuations. Interestingly, we find that builders with more private order flows (i.e., higher block valuations) are more likely to win the block, while retain larger proportion of profits. In return, such builders will further attract more private order flows, resulting in a monopolistic market gradually. Our findings reveal that PBS in current stage is unable to balance the profit distribution, which just transits the centralization of block profits from institutional stakers to the monopolistic builder.

Robert Wutscher

No abstract is available for this record.

Jorge Cuéllar, David Bue Pedersen

No abstract is available for this record.

Murali Krishna Pasupuleti

Abstract: Abstract: This chapter explores the transformative potential of digital currencies in driving financial inclusion and fostering equitable growth across the global economy. It examines how digital currencies, including cryptocurrencies and central bank digital currencies (CBDCs), are lowering barriers to financial access for unbanked and underserved populations by offering decentralized, secure, and cost-effective solutions. Through case studies from regions like Africa, Latin America, and Southeast Asia, the chapter highlights how these technologies empower marginalized communities, improve access to financial services, and promote economic development. It also discusses the challenges, such as regulatory hurdles, technological infrastructure, and trust issues, that must be addressed to scale digital currencies globally. Finally, the chapter emphasizes the role of innovation, public-private partnerships, and investment in achieving a more inclusive financial system that drives sustainable and equitable economic growth. Keywords: digital currencies, financial inclusion, equitable growth, cryptocurrencies, central bank digital currencies, CBDCs, unbanked, underserved populations, decentralized finance, blockchain, economic empowerment, financial access, regulatory challenges, public-private partnerships, innovation, global economy.

Raymond C. Niles

No abstract is available for this record.

vijimon oorkolil

“ KosmosCoin: Redefining Global Finance through a New Reserve Currency Paradigm”. The concept of KosmosCoin as a global reserve currency presents a revolutionary approach to addressing the challenges and limitations of existing fiat currencies and cryptocurrencies. Unlike traditional currencies, KosmosCoin is backed by tangible assets such as land, population, and precious metals, providing inherent stability and value. This paper explores the unique selling points of KosmosCoin, including its potential to enhance economic stability, promote financial inclusion, and increase monetary sovereignty. By leveraging blockchain technology and decentralized governance models, KosmosCoin aims to create a transparent, efficient, and inclusive financial ecosystem. Key findings of this research indicate that KosmosCoin could significantly reduce transaction costs, improve liquidity, and facilitate global trade. However, practical implementation faces challenges related to scalability, security, privacy, and regulatory compliance. Despite these obstacles, the potential economic implications of KosmosCoin are profound, suggesting a promising avenue for reshaping the global financial landscape. This paper concludes that with collaborative efforts and strategic planning, KosmosCoin has the potential to become a viable and transformative global reserve currency.

Thammarak Moenjak

Abstract This chapter first reviews some of the background concepts on central bank digital currency (CBDC) to provide a broad context, before diving into wholesale CBDC often a starting point for central banks to build CBDC prototypes based on distributed ledger technology (DLT), as it involves less complexity in experimentation. This chapter also examines cross-border CBDC, often an extension of wholesale CBDC prototypes based on DLT. The next chapter will then discuss retail CBDC as well as the prospects of economy-wide roll out of CBDC going forward.

Thammarak Moenjak

Abstract This chapter examines possible regulatory updates to address the challenges of monetary sovereignty and singleness of money. These two challenges are particularly pertinent to the new means of payments enabled by the use of distributed ledger technology (DLT). These new means of payment include cryptoassets such as bitcoin and ether, stablecoins and tokenized deposits. The degree to which these new means of payment can be a threat to monetary sovereignty and singleness of money can differ widely, depending on the contexts of the jurisdictions, as well as the details of these new means of payment themselves.

Togzhan Barakbayeva, Soroush Farokhnia, Amir Kafshdar Goharshady, Markus Gufler · 5 authors

Cardano is a blockchain protocol based on proof-of-stake and an extended UTXO model which also supports arbitrary smart contracts. Its primary currency, Ada, is currently one of the global top ten cryptocurrencies with a market cap of more than 16 billion USD. In Cardano, new blocks are produced by stake pools. Any holder of Ada can delegate their stake to a pool. The underlying proof-of-stake consensus protocol is Ouroboros Praos, which divides time into a number of epochs and each epoch into a number of slots, each corresponding to one second. In each slot, leaders are randomly selected to produce and add new blocks to the blockchain, with their selection probability being proportional to their stake. Each block can contain a sequence of transactions and block production is rewarded in two ways: (i) transaction fees and (ii) monetary expansion. The producers have no control over (ii), but can optimize (i) by choosing which transactions to include in their blocks. Thus, they are incentivized to maximize the total transaction fees. In this work, we consider the natural optimization problem of forming a block with maximum transaction fees given a set of unmined Cardano transactions. We show that by exploiting the sparsity of interrelations between transactions, i.e, the small treedepth of dependency -conflict graphs, it is possible to obtain a polynomial-time algorithm that outputs optimal blocks. We implemented our algorithm in a free and open-source tool called Pixiu. Using Pixiu, we provide extensive experimental results over real-world transaction data on the Cardano blockchain demonstrating that our approach increases the block producers' revenue by almost 1,357.82 USD/day = 495,604.3 USD/year11A longer version of this work is available at [1]..

Nério Andrade de Brida, Jonathan Barros Vita

Non-fungible tokens são arquivos digitais imutáveis e que não podem ser copiados ou substituídos, lançados no mercado como ativos colecionáveis, gerando escassez artificial, altamente negociáveis. Por sua natureza econômica, desperta-se o interesse nas relações estabelecidas em que esses ativos se constituem como objetos passíveis da tributação em suas várias formas. O presente trabalho tem como objetivo definir o que são esses ativos digitais negociáveis, sua exposição comercial e as implicações no que se refere ao importo de renda e proventos sobre o ganho de capital auferido nessas relações jurídicas. Para tanto, examinando sob enfoque da regra matriz de incidência, através do método dedutivo, propõe descrever a forma de incidência da hipótese tributária do imposto de renda e proventos sobre o acréscimo patrimonial obtido com a operação, que tem como objeto, um token não fungível.

Bing Hu

This thesis explores the transformation of traditional banks into centralized digital banking systems as a strategic response to the burgeoning challenges posed by decentralized finance (DeFi) technologies such as blockchain and cryptocurrencies. As these technologies disrupt traditional financial paradigms, offering more direct, efficient, and transparent financial services, traditional banks face increasing pressure to adapt and evolve. This work argues for the necessity and feasibility of centralized digital banking as a comprehensive countermeasure to DeFi. Through a detailed examination of current banking challenges, including inefficiencies in customer service, transaction processing, and compliance, the thesis proposes a model of banking that leverages centralization and digitalization to address these issues. The proposed model not only enhances operational efficiency and customer engagement but also fortifies the banks’ competitive edge in a digital economy. Furthermore, the thesis discusses the long-term implications of such transformations, predicting that centralized digital banks will not only coexist with DeFi platforms but may also lead the financial services industry by adopting innovative technologies that drive customer satisfaction and operational excellence. Recommendations are provided for both banks and policymakers to foster an environment conducive to the development of robust, secure, and customer-focused digital banking services. In summary, this thesis affirms that centralized digital banking is not merely a defensive strategy against the rise of DeFi but a forward-looking approach that will define the future of banking.

Naomi Takeda

Scheme of the CBDC: Ueda and Hay state that the e-CNY issued by the People's Bank of China (PBOC) “adopts a similar two-tier system in which the PBOC issues e-CNY and retail banks distribute it through wallets set up by users … the PBOC admits e-CNY as its liability. Similarly, the NBC should admit the Bakong as its liability.” In reality, the e-CNY and the Bakong adopt contrasting schemes. With the e-CNY, while private banks provide user interfaces and wallets for retail users, money within such wallets is a liability of the PBOC—not of private banks backed by CB reserves, which is the case for the Bakong. Readers would benefit from learning that, here, the provider of the wallets differs from the issuer of money, that is, whose liability money is. Without recognizing this, one cannot fully grasp the typical two-tier system that provides a retail CBDC. Quasi-retail CBDC: Ueda and Hay's statement that “the NBC has been emphasizing that the Bakong is not a liability of the NBC, which is not true from the viewpoint of the underlying technology and economics” needs further clarification and consideration. Distributed ledger technology (DLT) accommodates various types of money on a common platform. It does not equate tokenized deposits with a CBDC or transform the nature of tokenized deposits into a CB liability. Furthermore, DLT adoption is neither a prerequisite nor a general feature of a retail CBDC. Economic researchers should be mindful of the differences between a retail CBDC (a CB liability) and a quasi-retail CBDC backed by CB reserves (not a CB liability), as the latter could carry risks that affect user behavior. Economics viewpoints vary depending on how we define economics; oversimplification should be avoided. Future course: Finally, Ueda and Hay argue that “[i]f the demand continues to be low like this for a few more years, the NBC should stop offering the retail Bakong … the government should not provide services that the private sector can provide.” To begin with, abolishing the retail Bakong and leaving retail payments in the hands of the private sector would not prevent dollarization and ensure efficient and stable retail payments in emerging economies. These policy objectives ought to be pursued by the public sector, not the private sector. Assessing the long-term effects of the Bakong today would be a prejudgment. It is not uncommon for payment infrastructures to become widely adopted with a lag due to existing conventions. Additional policy actions therefore may well likely be taken in the future. A conceivable future might involve continued efforts to establish network effects of the Bakong while proceeding with structural reforms and conducting sound fiscal and monetary policies so as to increase the credibility of the KHR, then shifting into KHR payments when deemed appropriate.

Emilios Avgouleas, William Blair

CBDCs are a digital form of fiat money. CBDCs raise a number of challenges in terms of payments’ privacy. CBDCs may be implemented in two models (wholesale and retail). CBDCs may be used on a cross-border basis, subject to the connectivity of the technology. Cross-border use of some countries’ CBDCs could even bring about, under certain conditions, a shift in geopolitical power, especially if challenger currencies were to eventually lead to a replacement of the USD as the global reserve currency. As regards the key question about the interoperability of CBDC systems with private payment networks, the answer relies on the choice of technology and the location of the CBDC’s ledger, that is within or outside of existing Central Bank clearing and payment systems. CBDCs could transform the way modern societies conduct payments and handle money. Possible challenges that CBDCs raise in connection to monetary policy and financial stability will likely be manageable. Any financial stability issues that remunerated CBDCs might raise, in the sense that they might be in competition with bank deposits, could arguably be dealt with by setting the interest rate that remunerated CBDCs might attract at a level that is not competitive with bank deposits. Similarly, CBDCs are not expected to raise issues with respect to monetary policy and money circulation since essentially CBDCs will act as a replacement of fiat money, albeit in a digital rather than physical form. CBDCs are going to be a completely different form of digital currency than cryptocurrencies, both in terms of technology and in the fact that there will be a centralized state issuer rather than a private one. They will not be volatile as cryptocurrencies, but whether they would be a stable store of value will depend on the state of foreign exchange (FX) markets and exchange rates set by those markets. Cybersecurity safeguards will prove indispensable to building the public’s trust in CBDCs; if money goes missing from the system due to a cyber-heist, then that would undermine consumer confidence in the CBDC system. Thus, strong cybersecurity safeguards will prove indispensable to building the public’s trust in CBDCs. CBDCs will have to be handled through a system that is not excessively energy hungry in contrast with cryptocurrency operations. CBDCs are meant to be inclusive, and not exclude the digitally handicapped part of the population. Cross-border use of CBDCs could herald a new era of seamless, faster, and cheaper cross-border payments. English property law has accommodated crypto assets as a distinct form of personal property; thus the right approach is that CBDCs is that CBDCs will readily be accommodated in English law as a digital version of fiat currency. Several major Central Banks around the world have announced plans to develop a Central Bank Digital Currency (CBDC). The development of CBDCs may be seen as an assertion of monetary sovereignty—perhaps the last chance to do so in the face of technological change—but also raises several socio-economic challenges. This article critically explores these issues, including the configuration of a CBDC system, depending on the level of involvement allowed for the commercial banking sector, with reference to the policy papers issued by global regulatory bodies (eg, the Bank for International Settlements (BIS) and International Monetary Fund (IMF)). It also touches on the utility of different technologies mooted by central banks and their impact on the preservation of consumer privacy. This article postulates that CBDCs, rather than merely heralding the return of the state in the realm of money and payments, constitute a final frontier in the field of digital money and digital payments.1 It is also arguable that any monetary policy and financial stability challenges that CBDCs might pose would be manageable through the appropriate use of interest rates and internally imposed caps on deposits and withdrawals. The digitization of international payments opens the window for uniformity of the means of exchange that may be used for international payments. The use of CBDCs on a cross-border basis is mostly an issue of technological connectivity, which is yet an unresolved, and difficult to resolve, matter. If connectivity is ensured, leading to widespread cross-border use of CBDCs, this could give rise to strong competition between countries to promote their own CBDCs and will signal a new era of faster and seamless cross-border payments. This could possibly lead to lower transaction costs for cross-border payments, which in turn would make migrant labour remittances to their home country much cheaper, adding serious social value to the cross-border use of CBDCs. Given that CBDCs will have an exchange rate of one equals one, vis-à-vis the underlying currencies adopting a foreign CBDC would be tantamount to currency substitution; in fact, several countries around the world have experimented with dollarization, namely the replacement of their local currency with the USD. The experiment was mostly carried out in countries with weak national currencies with mixed results, for example, in Zimbabwe and Venezuela the experiment resulted in relative price stability and ensuring control of rampant inflation, especially with regard to food. On the other hand, in other cases,2 the adoption of a foreign currency has led to further weakening of the exchange parity of the national currency reinforcing the cycle of instability for the local economy, since local savers rushed to turn their savings in local currency to the newly adopted foreign currency. At the same time, the use of national CBDCs on a cross-border basis opens a window of opportunity for emerging economies such as China to promote the use of their CBDCs in international payments. Such a development would arguably, in the long run, enable the currencies of those countries to challenge the USD or edge away the USD from its long-entrenched position as the global reserve currency, thus enabling countries issuing CBDCs that are used on a cross-border basis to mount a gradual assault on the USA’s global financial hegemony. Here it should be mentioned that China has expressed the ambition to replace the USD as a global reserve currency through the cross-border use of the digital Renminbi (RMB); an obstacle is that the currency is not freely convertible; either way, such a development could possibly lead to the radical transformation of current global monetary arrangements.3 The main part of this article is structured into four sections, in addition to this introduction and the conclusion. Section 2 provides a critical evaluation of the rationales for the development of CBDCs. Section 3 addresses the requirements and implications of the possible use of CBDCs on a cross-border basis, as well as the formidable obstacles that these would face. Section 4 covers some of the legal and economic aspects of CBDCs (including the impact of CBDCs on both financial stability and monetary policy) as well as the possible impact of remunerated (interest-bearing) CBDCs. Section 5 examines the key properties of different configurations of CBDC systems and discusses the ramifications of the different CBDC architectures and technology models that may be employed by central banks. Section 6 brings the different strands of the analysis contained within this article to a conclusion. This raises a question that seemed to have been settled by the fact that central banks normally exercise monetary policy through the balances of commercial banks, allowing thus the multiplication of private money in the economy. The idea of CBDCs constitutes a response to the recent trend of the increasing digitization of money and privatization of payments. Among the discussed benefits of CBDCs is better financial inclusion,4 especially in countries where it is expensive to have access to a commercial bank branch network, for example island states like The Bahamas5 and other states facing similar challenges in terms of logistics. It has to be noted here that some commentators are not convinced about the benefits of CBDCs, for example, the House of Lords issued a report on the Bank of England’s plans for a CBDC with the title CBDCs: A Solution in Search of a Problem?6 However, this may be unduly negative. Depending on the type of technology, central banks are likely to proceed with the development and/or the issuance and circulation of CBDCs, and technical solutions that can help with the preservation of privacy of citizens’ payment information.7 Notwithstanding, in a number of countries including Singapore,8 CBDCs have not progressed as fast as expected. The advent of digitization of money and payments has mostly been dominated by private sector operators and has given rise to a number of challenges for public policymakers, including identifying ways to secure universal and affordable access to private payment networks, and the protection of consumers from cryptocurrency scams. To these challenges, states have not reacted in expected ways, namely through the introduction of a heavier form of regulation of cryptocurrency markets and private payment system providers, but rather through the introduction of a competing form of digital currency and payment system. The key rationales for the introduction of CBDCs have been summarized by the Bank of International Settlements.9 These are payments finality, countering the market power of private providers of payment systems; making innovation work for all citizens and also to secure uninterrupted consumer access to payment systems.10 A number of other rationales are included in the European Central Bank’s paper on a digital Euro.11 These include the provision of a further boost for the digitization of the economy and to safeguard financial inclusion and to lower transaction costs, for example to access private payment systems.12 A final rationale includes the ambition to provide a stable digital currency to act as an anchor for the placement of citizens’ savings (eg, without having to pay access fees to use a digital payment system). The physical handling of money and the conduct of payments have drastically changed in the current era. Payments on the one hand have been fully digitized and dominated by private sector payment system providers like the Visa and MasterCard networks. These developments alongside the emerging challenge of cryptocurrencies and the distinct shortcomings of cryptocurrency markets (including grossly excessive volatility) have mounted a massive challenge with respect to citizens’ payments and money circulation, namely the tight control of monetary policy by the state. Another major challenge has been citizens’ access to digital payment systems. The weaknesses of cryptocurrency markets and obstacles (eg, transaction costs) to access to the wider public and obstacles placed on the access of wider public to private payment systems have amounted to a form of market failure. These market failures have necessitated the introduction of public regulation, and in the of such regulation, several states and central banks around the world have for the development of competing digital currencies and payment this by the state. The introduction of CBDCs will the about whether money is a public in the sense that a number of in the economy such as payments and financial should be in the public The and of international payments, for example, migrant remittances and international a window of opportunity for the possible cross-border use of CBDCs. Cross-border use of CBDCs could lead to a new era of seamless international payments. The in which and handle money and conduct payments has changed in The of the digitization of money and payments has a window of opportunity for the development of CBDCs for cross-border use in countries with a strong economy. China is the country that has so expressed an ambition for different countries to use its CBDC as a means of exchange in international payments, the to in international through the possible replacement of the USD as a global reserve currency by the digital in the or The for the development of cross-border CBDCs is connectivity in terms of technology between payments systems in different A further and challenge to energy and which also around system and of the adoption of a digital currency by a country other than the issuing countries adopting CBDC are the issuing interest rates and exchange rates exchange rates normally a in terms of international and thus have an impact on the issuing of payments, that is of and the use of CBDC with respect to the adopting international payments would lead to the by the adopting country of the interest and exchange rates policy by the issuing country given that exchange rates can the of and might in the adopting economic that is to the of their economy. On the other hand, the of a CBDC can benefits to the issuing country including increasing the of its national currency and leading to the of title between the issuing and adopting on the question of whether CBDCs will make cross-border payments and cheaper, much will depend on the central so that they the connectivity of their systems and of cross-border legal question in this would be whether both the issuing and the adopting and on would to cross-border of CBDCs. This question could be by at the of in private international law (eg, the with cross-border of digital and with reference to cross-border of digital The of the in this may depend on where the CBDC or where the central bank that the are CBDCs will a form of money, if they the of money, which to the The as a means of The as a store of The as a of The are the properties to money by central banks and international financial regulatory Given that CBDCs are likely to be as fiat money, albeit in a digital it is within the of the issuing state to CBDCs as legal CBDCs used by the public will the for the of money by the to money. CBDCs can as money which cryptocurrencies do if CBDCs are also as legal by certain this way they will also the requirements set out by the approach to the of state money. It should be noted here that cryptocurrencies do not into either CBDCs, will both the and of money. The idea of Central CBDC to be the answer of and central banks to the recent around money, payments and in CBDCs are digital form of fiat money. has been a of about CBDCs around the and papers by major central banks such as the the European Central the Bank of as well as those in and but there is the of CBDCs. The way to approach CBDCs is to as digital fiat money distinct from and thus states can CBDCs as their legal The main in this is that CBDCs may or a on commercial banks on the of of bank deposits in for savers to their money into CBDC that are central banks can a on the of CBDC that an can and banks in could the that an may at a in These would the of a of bank deposits. much will depend on whether CBDCs with interest rates at or at a level to with savings If interest is at the rate to remunerated CBDCs could be so that it not with commercial savings other this is CBDCs could lead to a of monetary that not that they would lead to an in interest The of digital has mounted a challenge to control of the money CBDCs raise the question of whether they would the of money in circulation, thus leading to inflation, this mostly to CBDCs, which could CBDCs will be than a or replacement of fiat money in circulation, it that they will lead to leading to inflation, or have an impact on the existing of money in circulation in the question is as to the of commercial banks and private payment systems in the use of CBDCs. As regards the question of whether the CBDC will be in the form of a or in the form of an of the central banks that they will be and will be used in a way, not on a technology like terms of the choice between an and a there is in of but it has been by an of that central banks can issue or CBDCs in if they have the to issue and in the of CBDCs, it should be that it would be difficult to payment and finality, in the of CBDCs in the of a centralized payment and even if the CBDC system is not on technology payment and are much in the of CBDCs. The of in this is to payment but that with serious in a market with payment it is to the of CBDCs will be for payments in the from the fact that they may be an for and central banks to their way into control of money and payments in an economy, and in the exercise of monetary CBDC systems could in be as or systems. A system would the involvement of the commercial banking sector with CBDC payments and the of CBDC A CBDC on the other hand would that CBDCs will be used for payments by and (eg, The involvement of the private banking sector would a number of with respect to regulatory especially as regards the question of which in the system is and the of such the CBDC system, which banks on their as a of it which is going to conduct these if CBDCs are in and by the it is to be to they the to the CBDC system, to out these the Bank of has plans for the development of a digital which will work as a Similarly, the European Central Bank to the development of the digital as a It should be noted that some CBDC systems may work under both that is by the central the Bank of has announced plans to develop a payments will be through a system on the basis of carried out through the the Bank of plans the possible use of the digital as a CBDC without the that it could be used as a Similarly, the not the of its digital this The choice of the CBDC will also the issue of with regulatory and they will impact the of the CBDCs. If commercial banks are part of the system, then it would be commercial banks which will out the and the and with regulatory to the different requirements to money and payments. On the other hand, if the is through a of private then it will be to to out regulatory if a a payment through their systems. if the CBDC is there have been that the could be by the public with the central However, such a development could impact commercial banking where the public their savings with commercial banks. since the is that CBDCs will be a central bank this approach be it would make central banks a of failure. terms of this would the and of on central banks CBDC of the challenges to CBDCs the protection of the privacy of citizens’ payments and connectivity with private sector systems. as to the question of the form of CBDCs, namely whether they are in the form of an or this on whether CBDCs will be through the of the private banking in which CBDCs will be used for the payments of private and the of an the same system would also the of systems payments and payment finality, making for CBDC Such a system should also a for the secure of payment from the different possibly by the use of digital The use of CBDCs in the form of a sense if they are as CBDCs. Another major challenge to the interoperability with private payment networks, for example, commercial bank The answer to this challenge may be in the form of an between the CBDC and the where central banks the balances with commercial banks. on it could be that CBDCs can be a way for the state to in terms of payments and money and payment systems to all as CBDCs can access to payment systems and financial to without bank as systems are not to use for CBDC and payments even systems can safeguard their and level of would make to to the privacy of citizens’ payments. The preservation of privacy on the type of technology which will be used for the and of CBDCs, for example use of central systems would all about citizens’ payments to the central bank and any state are technical solutions to secure the privacy of on systems such as at this it be noted that major central banks have that they will not use a system for their CBDCs. Another technical that would provide a for the preservation of payments privacy could be the system on digital used and by citizens and The on this is that could with the central a to also enable or to the to be to handle their payments in CBDCs on a fact, it would be difficult for a CBDC system to work without a system of On the question of whether CBDC systems will be or central banks to have the question that the system will be by the of technology for CBDCs. Given that CBDCs will be a digital form of the national currency, to the that systems on CBDC systems to may be a way to to for the national currency which could boost exchange CBDCs could be a possible for the use of in markets the market of the and is to be in an where private sector innovation the to will depend on the CBDCs will prove with the public at other will they be CBDCs may prove to be an public control to money and with possible benefits for national contrast to cryptocurrency the possible of on CBDC the that CBDCs can be used to the same to the of certain to use CBDCs for the of CBDCs will depend on citizens’ If CBDCs prove to be and a stable store of and through a payments system which is from it will not be difficult for to citizens’ especially if they are also used as legal The of to control the use of CBDCs in CBDCs into an form of state could that the introduction of CBDCs would lead to in for both the at and for the would use CBDCs. The of the CBDC the answer to the question whether the CBDC will be with the of the banking sector or will also prove critical in terms of citizens’ and To citizens’ this will that the CBDC system would have a and that for such a and other issues, do not have an on is also mentioned as one of the in for the development of a digital and some other cryptocurrencies have in this respect which should and are not is which to the global economy should be allowed to to global CBDCs are the final frontier in increasing digitization of money and payments and the gradual of in the physical and in reinforcing the use of fiat money by the wider They also to be the last chance for state to monetary as of money and payments in national it would be in the for CBDCs to fully currency in a physical form. The is that money in a physical form has a distinct in terms of of for example, in that it not exclude the digitally The is that in of an such as a of technology, or an act of such as a physical or such as currency in the physical form can as a and possibly critical the development of CBDCs challenges which to some have been in this which has also to possible to the key CBDCs of the challenges that these raise like cross-border connectivity is certain is that the of CBDC systems will have a impact on payments and the provision of money in the economy and may have an impact on the of banking systems. of the challenges with CBDCs can through the type of technology that will be Given the challenges vis-à-vis the adoption of CBDCs, an international such as the should further on these challenges could be the adoption of CBDCs the including a form of technology to cross-border connectivity between different national central bank CBDC systems. However, it if a CBDCs to and the digital in money and payments would be Given competition from the private sector, the return of the state in the realm of money and of payment systems may prove to be with To in the the of money was the of central banks, and CBDCs may be a way to that in CBDCs may prove to be the last frontier for money and payments in the of the and have the not the bring about a radical transformation in the way that payments are and money is handled in This article is an and version of a paper to a on the of and at at the for of on this have several in to of the of the of of the and at the European Central for their and

Christian Pfister

Although there are currently four retail central bank digital currencies in circulation, no central bank has yet issued the wholesale form of a central bank digital currency. There are good reasons to do so, however, and central banks have already conducted projects in this area. A wholesale central bank digital currency could be issued in different ways. This article presents two "polar" scenarios, with a restrained and an extensive use of the possibilities offered by recourse to distributed ledger technology. Their consequences for monetary policy are discussed, and some precautions for central banks that intend to launch a wholesale central bank digital currency are underlined.