Central Bank Issued Digital Currencies

9 Pages Posted: 19 Feb 2021

See all articles by Bronwyn E. Howell

Bronwyn E. Howell

Victoria University of Wellington - School of Management

Petrus H. Potgieter

University of South Africa; Institute for Technology and Network Economics

Date Written: January 2021

Abstract

Digital payments are essential to the functioning of a modern economy, yet pose challenges to the prudential supervision of the financial system. At the same time, the use of physical cash persists in most countries due to its ease of use and the perceived or actual advantages of anonymity. A digital currency is seen as a possible solution to the oversight problem and a suitable instrument for modernising trade and exchange through the elimination of physical cash and its attendant production, storage and transport costs as well as its unsuitability for online payments. In this paper, we provide a non-technical overview of the advantages a central bank issued digital currency (CBDC), mechanisms through which such a currency can be implemented and how it might interact with the conventional banking system. The discussion includes but is not limited to distributed ledgers and we briefly consider the examples of three pilot CBDC projects.

Keywords: Digital payments, central banks, distributed ledgers

JEL Classification: G20, E42

Suggested Citation

Howell, Bronwyn E. and Potgieter, Petrus H., Central Bank Issued Digital Currencies (January 2021). Available at SSRN: https://ssrn.com/abstract=3782968 or http://dx.doi.org/10.2139/ssrn.3782968

Bronwyn E. Howell

Victoria University of Wellington - School of Management ( email )

Wellington 6001
New Zealand
+64 4 463 5563 (Phone)
+64 4 463 5566 (Fax)

Petrus H. Potgieter (Contact Author)

University of South Africa ( email )

P.O. Box 392
UNISA
Pretoria, Gauteng 0003
South Africa
+27 12 433 4622 (Phone)

Institute for Technology and Network Economics ( email )

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South Africa

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