The Sovereignty of Money and its Historical Transformations: the Invention of Central Bank Digital Money in the 21^st Century and its Geopolitical Consequences

The emergence of digital technologies threatens the sovereignty of money by opening up payment systems to non-bank players, the Bigtechs. These derive enormous rents from their monopolization of e-commerce platforms, including through the capture of consumer data. In the absence of any regulation, they exercise unfair competition vis-à-vis banks. Facebook's Libra project – now seemingly being sold - , purporting to establish a global currency under the control of a private monopoly, has caught the attention of monetary authorities and financial regulators. Apart from establishing regulations to restore competition in payment services, the assertion of monetary sovereignty within nations is leading to the emergence of central bank digital currency. This innovation appears at different speeds depending on the country. It comes in parallel to the disappearance of cash. In many countries by now, including China, provisions are made in the organization of payments to avoid destabilizing commercial banks.

The thorniest problem concerns the transformation of the international monetary system (IMS). Not a detail, the digital code that identifies central bank digital currency allows them to retain control of the cross-border use of the cash they issue. This fundamentally calls into question the principle of “dominant currency”. A reform of the IMS will have to follow with two possibilities: an accounting of the digital codes to establish a global synthetic currency or, more likely, the promotion of the digital SDR as the ultimate liquidity. This would, at last, establish monetary multilateralism by making the IMF the international lender of last resort.