Central bank digital currency

Abstract

Central banks have traditionally issued cash to the general public. With digitalisation, banknotes are becoming a technically outdated payment instrument, and some central banks have explored the possibility of central bank-issued electronic money applicable to retail payments. Electronic central bank money would offer the public the possibility to hold central bank money in a potentially cashless future. In its present form, blockchain technology would probably not be a suitable solution, since it is unable to process a sufficiently large number of transactions. Electronic central bank money would potentially have significant implications for other areas of central bank policy, which should be meticulously analysed. JEL codes: G21, E58, E42 We would like to thank Juha Kilponen, Tuomas Välimäki, Jarmo Kontulainen and Esa Jokivuolle for valuable comments. The opinions expressed in this paper are those of the authors and do not necessarily reflect the views of the Bank of Finland or the Eurosystem. This article was originally published in Finnish under the title ”Digitaalinen keskuspankkiraha”, BoF Economics Review 4/2017. Bank of Finland BoF Economics Review