Digital Fiat Research Articles

E-CNY and Digital Economy in China

This paper highlights the inescapable trend of digital currency growth by examining past currency patterns, and explores the ties between digital currency and the digital economy. With the case of China, this paper forecasts the future improvement pattern of digital money. In the midst of the fast growth of private cryptocurrencies, China developed the digital currency with the goal of serving the digital economy and committing to the globalization of the digital renminbi and the digital economy. While Europe and the United States were experiencing continued stagnation in 2022, China has entered the cycle of loose monetary and fiscal policy. China views digital fiat money and digital economic development as a breakthrough to drive the transformation of the current economic system, new inventive growth, and the safety of the whole supply chain in the context of the scissors gap. It has become one of the forefront countries in the digital field, with numerous experiences that can be learned by countries around the world. This paper also creates the concept and calculation formula of the e-CNY Index, sets the year 2022 as the first year of the e-CNY with the initial value of the index at 100; it also gives suggestions for creating and calculating the China-style Digital Economy Index. The importance of these indices as new tools for tracking and evaluating the digital macroeconomy in China is presented, providing a promising direction for future in-depth research on digital fiat currency.

The determinants of issuing central bank digital currencies

Central Bank Digital Currencies (CBDC) are considered ‘digital fiat currencies’ that do not have a physical form, which is a key distinction from conventional fiat money. This study aims to identify factors that influence central banks’ decisions in taking advanced actions to issue CBDC, namely, the economic, market, demographic and technical factors. Data is collected from the CBDC Tracker and the WB database for the period 2013–2021. We applied the Pooled OLS estimations to examine the impact of the key factors on being in an advanced stage for issuing CBDC; moreover, probit and logistic regression are employed to robust our results and overcome the limitations of Pooled OLS. The findings demonstrate that underdeveloped economies are more engaged in issuing CBDC. Besides, better regulations, FDI inflow, young populations, and more urban societies would increase the probability of CBDC issuance. Nevertheless, results show the impact of technical factors is heterogeneous across countries.

Central bank digital currency: A systematic literature review using text mining approach

Central bank digital currency (CBDC) is seen as a possible next step in the evolution of money, offering a more stable unit of account, a more efficient medium of exchange, and a safer way to store value. However, since it began to get significant attention from academics and practitioners a few years ago, many concerns about how a central bank may build an efficient CBDC and how it would impact a country's current financial system still remain unanswered satisfactorily. Based on the combination of text mining and systematic review methods, this work presents a thorough literature assessment of 191 academic papers on CBDC in order to identify major research issues and knowledge gaps that may be addressed in the future. We find seven primary research themes linked to CBDC including (1) Central bank, (2) CBDC and other digital currency, (3) CBDC and money markets, (4) CBDC and monetary policy, (5) CBDC design and technologies, (6) CBDC and payment system, and (7) CBDC and financial stability and regulatory. The finding helps provide both overall and in-depth views of the current state of research in digital fiat currency topics, as well as drawing some important implications and suggestions on directions for the future research.

Monetary attribute of stablecoins: A theoretical and empirical test

<abstract> <p>With the continuous expansion of their market size and scope of use, the monetary attribute of stablecoins has become a focal point. The identification of the monetary attribute of stablecoins is a prerequisite for their supervision. Based on the essence and macroeconomic effects of money, this paper analyzes the monetary attribute of stablecoins from theoretical and empirical perspectives. We find that in the traditional financial market, stablecoins are not widely accepted, and their increased supply competes with traditional financial assets. As new types of digital assets, they do not possess a monetary attribute. However, in the digital asset market, stablecoins are widely used. The increase in issuance pushes up asset prices and brings liquidity effects to the market. Therefore, stablecoins possess a monetary attribute in the digital asset market and play the role of "digital fiat currency". This private sector liquidity is not controlled by the government and tends to accumulate risk. Therefore, the government should clarify the legal attribute of stablecoins according to their monetary attribute, strengthen the supervision of stablecoin issuers and prevent the private sector from monopolizing the digital asset market transaction medium.</p> </abstract>

The Relationship between Digital RMB and Digital Economy in China

By comparing the historical patterns of currency development, this paper pointed out the inevitability of the development of digital currency and the relationship between digital currency and the digital economy. With the example of China, this paper predicts the future development trend of digital currency. In the context of the rapid development of private cryptocurrency, China launched the digital currency based on serving the digital economy and committed to the globalization of the digital renminbi (RMB) and the globalization of the digital economy. The global economy in 2022 ushered in stagnation, and China treats digital fiat currency and the digital economy development as a breakthrough to pursue economic transformation and new growth. It has become one of the forefront countries with numerous experiences that can be learned by countries around the world.

블록체인 및 분산원장기술 국제 표준화 동향 및 고찰

공식 표준화 기구인 ISO, ITU-T와 민간/산업계 컨소시엄 단체인 IEEE, W3C 등과 같은 사실 표준화 기구에서 기술 표준화를 진행하고 있다. FG-DLT(The Focus Group on Application of Distributed Ledger Technology), FG-DFC(The Focus Group on Digital Currency including Digital Fiat Currency) 연구반에서 연구를 마치고, ITU-T SG17 연구반에서 개발 중인 블록체인 및 분산원장 기술 표준화 진행 상황과 ISO/TC307에서 ISO/IEC JTC1/SC27 정보보호 기술 분과와 공동 작업 중인 표준화 진행 과정 그리고 IEEE와 같은 민간/산업계 컨소시엄 단체 표준화 동향을 소개하고자 한다. 그리고 본문에서, 필자가 국내 대표 전문위원으로 ISO 및 ITU-T 기구에서 블록체인 및 분산원장 기술 국제 표준화 활동 수행하며, 현 시점의 표준화에 대한 의견을 제시하고자 한다.

Цифровизация и эволюция денег как социальной технологии учета

Objective: to research the evolution of money as a social technology of account under digitization.Methods: dialectical approach to cognition of social phenomena using the general scientific and specific scientific methods of cognition.Results: Throughout the history of monetary thought, economists have predominantly emphasized the function of money as a medium of exchange along with the intrinsic properties that enhance its salability and credibility as the most liquid store of value. But the social institution of money co-evolves with technology. It is significant that the advent of digital crypto-currencies was initiated by computer scientists and has taken economists completely by surprise. As a consequence, it also forces us to rethink the basic phenomenology of money. In accordance with the views of Wieser and Schumpeter, digitization brings to the fore the immaterial function of money as a standard of value and social technology of account, which increasingly absorbs its function as a medium of exchange. The potential impact of this on economic policy is huge. The variety of different crypto coins has proven the technical feasibility of competing private currencies as proposed by Hayek. In the long term, however, there is reason to doubt the persistence of intense competition. One must fear that major digital platforms will extend their current dominance in multisided virtual market places to include digital payments and money. Central banks are increasingly anxious to preserve public sovereignty over the common unit of account and are considering issuing their own digital fiat money. After the current era of intense creative experimentation, the potentially new spontaneous order of private crypto-currencies is likely to be supplanted by central bank digital currencies (CBDCs), the design of which will depend on deliberate public choices and policies. Scientific novelty: the work discloses the provisions of the Austrian theoretical discourse on the proper phenomenology of money, contrasting Menger’s canonical explanation with the ‘heretical’ and largely forgotten views of Wieser and Schumpeter. Also, the work offers a brief look back at the early origins of money and shows that credit and related accounts became important drivers of financial development long before coins were minted. The author examines two major innovations of the current digitization of money: a) the emergence of crypto coins, and b) the probable emergence of central bank digital currencies.Practical significance: the main provisions and conclusions of the article can be used in scientific, pedagogical and law enforcement activities when considering the issues related to regulation of monetary-credit policy of the states.

Предпосылки появления и мировой опыт внедрения цифровых валют центральных банков

Objective: to determine the advantages and features of the development of centralized digital currencies and the prospects for their development globally.Methods: historical method, abstract-logical method.Results: the development of technologies and infrastructure and the experience in the use of public digital currencies have led to the logical interest of most central banks in issuing a new form of money - digital currencies of central banks. The main types of design of central banks digital currencies are considered, as well as the requirements for digital fiat currencies. Some examples of countries that have conducted test implementation and experiments with CBDC are presented. It is determined that we are beginning to move from cash to digital fiat currencies and the next step will be the transition to fully digital forms of money, which can lead to many potential consequences for the banking and monetary systems.Scientific novelty: the article shows that the development of technologies, including payment technologies, anti-crisis measures of governments and central banks, and, as a result, the increase in the money supply led to a surge in the interest of central banks to issue their own digital currencies. It is shown that a single position on the properties and design of digital fiat currencies has not yet been developed. It is stated that the transition to CBDC will definitely lead to a change in monetary policy and to the financial sector nationalization.Practical significance: the analysis of the methodology for determining the properties and design of digital currencies of central banks, presented in the article, will be useful for developing an approach to the implementation of digital national currencies. The presented data on the development of digital currencies concepts allows identifying the connections and patterns of the development and emergence of a new digital form of money.

Legal policy of the Russian Federation and the People's Republic of China in the area of digitalization of national currency

The subject of this research is digital national currencies of the People's Republic of China and the Russian Federation. The advent of the new digital era entails inevitable, objectively dictated digital transformations of all spheres of social life. The financial and banking sector in Russia, China, and other countries, is in need for legislative-digital regulation by implementing digital fiat currency. One of the most promising vectors of development is the creation and introduction of new forms of currencies into circulation, which would be recognized by public authority as a legal means of payment, as well as subject to effective oversight by government bodies. The novelty of this research lies in the comparative legal analysis of the experience, as well as the stages of implementation of digital national currency in the Russian Federation and the People's Republic of China. The article raised a pressing issue on feasibility of introducing digital ruble into the Russian reality, and thus, discusses successful experience of the Chinese government that a millennium ago was first to invent paper currency, and now is one of the world leaders to introduce digital currency alongside cash money. The concept of “digital currency” is often identified with cryptocurrencies and payment systems, which prompted the authors to conduct a comparative analysis of these terms. The analysis of Russian and Chinese legislation in the area of digital currency, as well as the established practice of implementing a new monetary form into the country’s economy, allowed outlining the pros and cons of such innovation.

Central bank digital currencies: policy and operational perspectives for India

Cryptocurrencies are an innovation that brings together computing, networking and an incentive regime to create secure, decentralized, peer-to-peer digital currency that lends itself to be used as a medium of exchange and as storage of value. Most Central Banks have been reluctant to permit cryptocurrencies considering risks to the financial system, and have veered towards Central Bank Digital Currency or ‘Digital Fiat’ that shares several advantages of cryptocurrencies but are entirely mandated and managed by the Central Bank. This paper examines provides a background to CBDCs and discusses some of the policy and operational aspects that an Indian CBDC launch should consider.

Digitization and the evolution of money as a social technology of account

Throughout the history of monetary thought, economists have predominantly emphasised the function of money as a medium of exchange along with the intrinsic properties that enhance its salability and credibility as the most liquid store of value. But the social institution of money co-evolves with technology. It is significant that the advent of digital crypto-currencies was initiated by computer scientists and has taken economists completely by surprise. As a consequence, it also forces our profession to rethink the basic phenomenology of money. In accordance with the views of Wieser and Schumpeter, digitization brings to the fore the immaterial function of money as a standard of value and social technology of account, which increasingly absorbs its function as a medium of exchange. The potential impact of this on economic policy is huge. The variety of different crypto coins has proven the technical feasibility of competing private currencies as proposed by Hayek. In the long term, however, there is reason to doubt the persistence of intense competition. One must fear that major digital platforms will extend their current dominance in multisided virtual market places to include digital payments and money. Central banks are increasingly anxious to preserve public sovereignty over the common unit of account and are considering issuing their own digital fiat money. After the current era of intense creative experimentation, the potentially new spontaneous order of private crypto-currencies is likely to be supplanted by central bank digital currencies (CBDCs), the design of which will depend on deliberate public choices and policies.

Tethered, or Untethered? On the interplay between stablecoins and major cryptoassets

Stablecoins and their leader Tether have been one of the controversial topics of cryptomarkets and their role in price rallies of the past few years has been questioned repeatedly. Using the generalized vector autoregressive framework and directed spillovers based on the forecast error variance decompositions, we find no evidence of stablecoins boosting the prices of other cryptoassets. On the contrary, the increased stablecoins issuances come in reaction to the other cryptoassets price changes, which suggests they rather reflect increasing demand in investing into the cryptomarkets that gets materialized in demand for the “digital fiat”.

Digitization and the Evolution of Money as a Social Technology of Account

From Aristotle to Ricardo and Menger, economists have emphasised the function of money as a medium of exchange together with the intrinsic qualities that increase its saleability and credibility as a most liquid store of value. But the social institution of money co-evolves with technology. It is significant that the advent of digital cryptocurrencies was initiated by computer scientists and has taken economists completely by surprise. As a consequence, it also forces our profession to rethink the basic phenomenology of money. In accordance with the views of Wieser and Schumpeter, digitization brings to the fore its immaterial function as a standard of value and social technology of account, which increasingly absorbs that of a medium of exchange. The potential impact on economic policy is huge. The variety of different crypto coins has proven the technical feasibility of competing private currencies as proposed by Hayek. In the long term, however, there is reason to doubt the persistence of intense competition. One must fear that major digital platforms will extend their current dominance in multisided virtual market places to include digital payments and money. Central banks are increasingly anxious to preserve public sovereignty over the common unit of account and consider to issue their own digital fiat money. After the current era of intense creative experimentation, the potentially new spontaneous order of private crypto-currencies is likely to be supplanted by central bank digital currencies (CBDCs), the design of which will depend on deliberate public choices and policies.

Future of currency: a comparison between traditional, digital fiat and cryptocurrency exchange mediums

The ever-increasing computing power backed by Moore's law and the rapid breakthroughs in encryption has transformed the way currency is transferred and used. While the traditional government-controlled currency maintains its dominant position, a new virtual currency known as cryptocurrency has sprung up. It competes head-on by decentralizing the system, facilitating peer-to-peer transactions, and offering a universal exchange medium. However, the phase shift process is in its early stage, hindered by doubts in the mind of the public. In this paper, a comparison has been made between traditional, digital fiat and cryptocurrency, using the technique for order of preference by similarity to ideal solution (TOPSIS). It helped to ascertain the current level of awareness amongst the people of Pakistan and their likelihood of adopting the virtual currency. A forecasting approach along with a case study is also employed to see the future trends and security concerns revolving around the new medium.

Future of currency: a comparison between traditional, digital fiat and cryptocurrency exchange mediums

Future of currency: a comparison between traditional, digital fiat and cryptocurrency exchange mediums

The Model of Creation of the Single Payments Area within the Eurasian Economic Union

The article considers the theoretical model of the creation of a payment bank of the Eurasian Economic Union. The validity of the creation of an issue bank, which at the same time can carry out the functions of a macroregulator of the Eurasian Economic Union, has been stated and proved. The necessity and economic feasibility of creating the union’s own digital fiat currency is substantiated. This will significantly reduce the sanctions pressure on Russia exerted by the United States, releasing Russia's economy from dollar dependence. Clearing based payments can be effected by means of a blockchain.

Cryptocurrencies and Digital Fiat Currencies

AbstractCurrent generations of cryptocurrencies are not money, but future ones may be. While Bitcoin performs poorly as a store of value, it is actually on par with the Venezuelan bolívar over the last decade, and the Argentinian peso over the decade from 1986. I evaluate arguments in favour of central banks issuing digital fiat currency—intended to replace cash—and digital fiat money—intended to replace money more broadly. Digital fiat currency appears a natural step forward, but digital fiat money would be a bad idea as it makes the central bank responsible for the entire money supply.

Token Money or Cryptocurrency: technological Content and Economic Essence

The obligatory features of the unit of account are formulated. Distinctive characteristic properties of a set of cryptocalculation units, in particular, subsets of x-type (coin) and y-type (token) calculation units, are revealed. It is proved that these sets do not intersect. It is proposed to allocate a subset of C 2 in the set of coins, which has an additional characteristic property — functioning on the basis of a smart contract. The thesis that any settlement unit carries the cost of a resource is proved. Even for units of account with the so-called “intrinsic value” (bitcoin), the presence of a resource in its functions was found. Four characteristic properties inherent in the set of “money” (M = {money}) are disclosed and a subset DM = {digital money} is allocated, containing a set of digital Fiat money secured by the state (sets F = {fat}) and a subset P = {private}, which is actually an addition to the set F). It is proved that cryptocurrencies have characteristic properties of the set M = {money} only within their own community. The paradox of the algorithmic guarantor, reflecting the absence of the need for formalization of algorithmic informal institutions, is formulated. Disclosed defnitions of such concepts as “cryptocurrency”, “token economy” and “tokenization economy”. Euler circles are used to visualize the relationship between different sets of calculation units. A coherent classifcation of calculation units based on the characteristic properties of the identifed sets is formed. The results of the study can be used to form the basis of legal regulation of the circulation of digital units of account.

Study on the application of digital fiat currency in peer-to-peer investment and lending

Currently, peer-to-peer lending platforms are faced with the risk of funds misappropriation and lack effective means to ensure funds security and transaction consistency. The traditional method focuses on the assessment and control of the platform to indirectly guarantee the security of transactions and execution of contracts. This paper proposes a new solution based on digital fiat currency (DFC), which creates a trusted operating environment via a DFC wallet application service system and uses joint signatures to monitor the flow of funds to ensure security. Moreover, the proposed solution implements smart contracts in DFC wallets to achieve transaction consistency in order to ensure that the transaction process is open, transparent, safe, and controllable. In this way, troubled Internet finance platforms can transform themselves into DFC value-added service providers, playing a more transparent and regulated role in promoting inclusive finance in the digital currency ecosystem.

The Macroeconomic Policy Implications of Digital Fiat Currency

In this paper, we articulate a vision for how widespread adoption of Digital Fiat Currency may affect the macroeconomic levers a nation has at its disposal to steady economic growth. We describe monetary (and certain fiscal) policy implications of a nation’s choice to incorporate Digital Fiat Currency into a country’s currency mix. Specifically, we argue that Digital Fiat Currency presents a future for payments system innovation, post–crisis monetary policy implementation, and regulation of the shadow banking sector. It leverages the strengths of existing banking operations and payments systems infrastructure, while addressing critical weaknesses in the structure of money markets, and the coordination process between fiscal and monetary policy. As contemporary understanding of central banking operations evolves, and new challenges emerge in monetary and fiscal policy, as well as macroprudential regulation, the basic innovation in payment instruments offered by a Digital Fiat Currency becomes increasingly relevant and necessary.