Abstract
An overview of the definitions of central bank digital currency (CBDC), formulated by researchers of the International Monetary Fund (IMF), the Bank for International Settlements (BIS), the Bank of England, is presented, and the essence of the CBDC is revealed. It is stated that the existing electronic money is a digital form of obligations of financial intermediaries, and CBDC is a form of emission and obligations of central banks. The types and forms of CBDC are generalized, namely: retail or wholesale, account-based or token-based ones. The structure and functionality of the register, payment authentication, access to infrastructure, and governance are defined as factors taken into account during CBDC designing. Similar models of launching national CBDC by the Bank of England (economy-wide access or financial institutions access, and financial institutions plus CBDC backed narrow bank access) and BIS (direct, indirect, hybrid) are under consideration. The synthetic CBDCs are marked as a theoretical concept of CBDC. The overview of projects of the People's Bank of China – "e-renminbi", the Central Bank of the Uruguay – "e-peso", the Central Bank of the Bahamas – "sand dollar" and the Eastern Caribbean Central Bank affirm the interest of developing countries in launching national retail CBDCs. It was found that apart from the Riksbank with the successful "e-krona" project, most of the monetary authorities of developed countries (BIS, Bank of Japan, Bank of Canada, Deutsche Bank, FRS) are just planning or starting to experiment with the issuance of digital securities, which demonstrates their concern about the restructuring of the banking system and the changes of global role of traditional currencies. Among the positive consequences of the introduction of CBDC for the domestic banking system are the emergence of an alternative payment instrument, the implementation of effective monetary policy through increased influence on interest rates, and regulation of the legal regime of crypto currencies. At the same time, the introduction of CBDC involves certain changes in financial intermediation (replacement of the deposits of commercial banks with the CBDC, the performance of functions inherent to commercial banks by the central bank or fintech companies), and will require powerful technical capabilities, including those related to protection from cyber risks. The results of the study point to the need for a cautious approach to the implementation of the Ukrainian CBDC only after the NBU assesses the public demand for new forms of money and the impact of the launch of CBDC models on price and financial stability, and compares available payment technologies that can achieve the same goals as the CBDC.
Highlights
Many central banks are assessing the possibility of introducing widely accessible Central Bank Digital Currency (CBDC) into their economies.[1]
We show that e¤ects of CBDC on the banking system depends on the competition level in the deposit market and the interest rate on CBDC
This paper shows that CBDC can have a positive impact on both deposits and lending even if the central bank does not lend to the commercial banks and there
Summary
Many central banks are assessing the possibility of introducing widely accessible Central Bank Digital Currency (CBDC) into their economies.[1]. If the CBDC rate is su¢ ciently high, banks can only compensate for the rising funding cost by raising lending rate, which would lead to a reduction in lending This happens regardless of the competition level in the deposit market. If the deposit market is not perfectly competitive, a moderate interest rate on CBDC increases bank deposits and lending. Our model extends theirs to allow for imperfectly competitive banking sector and show CBDC can increase bank lending.[5] Andolfatto (2018), in constrast, considers an economy with a monopolistic commercial bank and shows that CBDC may have a positive e¤ect on bank deposits but no impact on bank lending if the central bank lends to the commercial bank. Extensions and some omitted proofs are collected in the appendix
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