Central Bank-issued Digital Currency

The concept of central bank-issued digital currency (CBDC) became very prominent in 2017/18, with numerous nations signaling their interest in blockchain technology and disclosing sandbox experimentation. These nations include China, Sweden, Estonia, Japan, Canada and Russia. State-initiated efforts to utilize blockchain technology can amount to either creating digital money on the backbone of a centrally governed blockchain (CBDC), utilizing blockchain as an infrastructure for data management and administrative processes, or combined usage. For example, Sweden has been experimenting with blockchain-based land registries, which does not necessarily require the implementation of a tradable asset on the specific blockchain.

CBDC is a state-initiated cryptocurrency which serves as a complement to or a potential replacement for traditional cash and fiat money. The cryptocurrency-replicate of a Euro, for instance, would represent the owner’s right to obtain the corresponding value in fiat currency. The number of cryptographic Euros issued by the central bank could be backed by a corresponding number of retained fiat Euro. Digital currency does not entail the costs associated with traditional cash, such as physical paper and metals, printing, transportation, storage and destruction. The advantages of digital currencies in economic, social and political realms could be realized while retaining the traditional fiat currency.

Furthermore, CBDC can be deployed in high-risk settings, such as gambling transactions, donation transactions and arms purchases, to create encapsulated monetary systems with official supervision and comprehensive monitoring capabilities for suspicious transactions. Research in this area should focus on the different forms and concepts of CBDC, the socio-economic impacts and crucial success factors associated with its introduction and the monetary and financial policy implications.

Potential research topics:

• Socio-economic effects associated with the introduction of CBDC
• Threats of state surveillance through CBDC
• Quantitative assessment: Potential efficiency gains of CBDC for national economies
• Analysis of non-monetary blockchain use cases for public services