Central bank digital currencies: motives, economic implications and the research frontier

Introduction

The digitalisation of economies has far-reaching implications for many areas of economic inquiry, not least for monetary economics and the concept of money itself. With the massive volumes of data that digital activities generate come new opportunities and challenges for societies and the monetary system. A tradition in monetary economics is to view money as a coordination device that serves as a substitute for the complete list of economic transactions – ie as society’s “memory” of all economic transactions (eg, Kocherlakota (1998)). Yet this abstract definition of money leaves open its institutional underpinnings, upon which the welfare consequences of the institution of money may crucially depend. In particular, due to the inherent network effects in payments (Rochet and Tirole (2006)) and the potential for the proprietary use of data, digital forms of money pose substantial challenges for competition, privacy and integrity. It is in this context that an important public debate has arisen on the issuance of new, digital forms of central bank money and how they will affect the architecture of the monetary system. 

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