Today the
European Central Bank (ECB) published a paper exploring how a Central Bank Digital Currency (
CBDC) could be designed primarily for payments, and to discourage its use as a store of value. This follows on previous
ECB activity and the recent promise by new
President Lagarde that research into CBDC would be accelerated.
The
40-page working paper explores other CBDC research and suggests a two-tier system for a “general purpose” CBDC with attractive interest rates offered for smaller sums suitable for payments. But far lower rates would be available for larger amounts. This envisions a primarily account-based CBDC as opposed to token-based.
Central banks are keen for commercial banks to maintain their current role of providing credit to corporates and consumers. Hence they want to avoid dis-intermediating the banks, which could happen if people chose to hold the majority of their wealth in CBDC. If banks have insufficient deposits, they can’t lend out money or would have to resort to more expensive funding sources.
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