The Future of the International Financial System: The Emerging CBDC Network and Its Impact on Regulation

29 Pages Posted: 18 Feb 2021 Last revised: 4 Aug 2021

See all articles by Heng Wang

Heng Wang

University of New South Wales (UNSW) - Faculty of Law

Simin Gao

Tsinghua University - School of Law

Date Written: January 15, 2021

Abstract

Central bank digital currency (CBDC) is a digital form of fiat currency. CBDC is expected to be a game changer in the international financial system, bringing increased complexities arising from technology and regulatory considerations, as well as generating greater currency competition. As more states begin exploring CBDC, the interactions between actors will lead to the emergence of a new CBDC network. What shape would the emerging CBDC network take? What would its network effects be? What would be the impact of the CBDC network on international financial system,or the global financial network? This article explores these questions by examining the emerging CBDC network and its regulatory implications. It argues that the CBDC network would likely be both decentralized and uncoordinated, making it unlikely to lead to convergence in CBDC regulation. The CBDC network would probably bring policy diffusion effects, with states behaving instrumentally, while shaking up the power balance between different actors, generating both cooperation and conflict. The CBDC network also has the potential to push international financial system towards becoming more decentralized.

Keywords: technology, central bank digital currency, international financial system, network, policy diffusion, regulation

Suggested Citation

Wang, Heng and Gao, Simin, The Future of the International Financial System: The Emerging CBDC Network and Its Impact on Regulation (January 15, 2021). Available at SSRN: https://ssrn.com/abstract=3766654 or http://dx.doi.org/10.2139/ssrn.3766654

Heng Wang (Contact Author)

University of New South Wales (UNSW) - Faculty of Law ( email )

Kensington, New South Wales 2052
Australia
+61 2 9385 9472 (Phone)

HOME PAGE: http://www.law.unsw.edu.au/profile/heng-wang

Simin Gao

Tsinghua University - School of Law ( email )

Law School (Mingli Building)
Room106
Beijing, Beijing 100084
China

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