Who Should Make Kroner? - A Review of Danmarks Nationalbank's Analysis of CBDC

CBS Working Paper

27 Pages Posted: 27 Feb 2018

See all articles by Ole Bjerg

Ole Bjerg

Copenhagen Business School

Rasmus Hougaard Nielsen

Copenhagen Business School

Date Written: February 2018

Abstract

This paper is a review of Danmarks Nationalbank's recent analysis of the prospects of implementing a Central Bank Digital Currency (CBDC) in Denmark. We concur with Nationalbanken's conclusion that CBDC does not add efficiency or further functionality to existing payment solutions. We argue, however, that their analysis fails to take into account the potentials for increased financial stability given the fact that CBDC carries no credit risk. We also find that Nationalbanken's dismissal of CBDC on the grounds that it does not provide new monetary policy tools, since interest rates are bound by the fixed exchange rate regime, fails to consider the value of CBDC in the event of a future crisis. Finally, we argue that the Nationalbanken's views may reflect a primary concern with the preservation of the existing banking sector in its current form over and above the needs of the general public.

Keywords: Central banks, money creation, digital currency, monetary policy, CBDC

JEL Classification: E40, E41, E42, E50, E51, E52, E58, E61, G21

Suggested Citation

Bjerg, Ole and Nielsen, Rasmus Hougaard, Who Should Make Kroner? - A Review of Danmarks Nationalbank's Analysis of CBDC (February 2018). CBS Working Paper. Available at SSRN: https://ssrn.com/abstract=3124816 or http://dx.doi.org/10.2139/ssrn.3124816

Ole Bjerg (Contact Author)

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Rasmus Hougaard Nielsen

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

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