In the process of digitization, the demand for cash is increasingly being replaced and payment transactions are privatized. The reflection of this development is a loss of power by the central banks, their instrument set threatens to lose efficiency. A reaction of the central banks to this problem, which has been much discussed in recent times, is the digital central bank money with a central bank account for everyone. This article explains the concept, the design options, embedding in the operational framework of monetary policy and the macroeconomic implications of the digital central bank money.
The basic idea of the digital central bank money is very simple: private households and companies are given direct access to the central bank balance by opening an account and forming deposits at the central bank. The idea of the "account for everyone at the central bank" is not new, it can be found, for example, at Tobin.3 In previous years, implementation failed due to the lack of technical feasibility of a local account management. Today it is only in the decision -making authority of the central banks to determine the details of the design features.
Private's deposits as well as the traditional central bank money (cash and reserves) are a binding nature of the central bank. Depending on the form of design, the digital central bank money can be closer to cash or closer to the reserves. While cash is circulating in the economy but is not electronic, the credit of the commercial banks (reserves) are digital, but do not circulate. The digital central bank money combines the properties: digital units of the central bank money are generally tradable and circulate in the economy.
The digital central bank money is a central system. In contrast to privately emitted digital currencies such as Bitcoin or Ethereum, the central bank has a clearly identifiable issuer who guarantees the functioning of the system and decides discretionary about the "rules of the game". A responsible institution should be an advantage for the general acceptance of digital money. If a central bank primarily wants to compensate for the displacement of the cash, it chooses a value-based (value-based) DZBG. A distinction must be made between the account-based (account-based) DZBG, which is to be regarded as an extension of the monetary policy instruments. In the case of value -based digital central bank money, private individuals do not keep the claim to the central bank in the form of an account, but in the form of value representatives, so -called tokens. The simplest and has been practiced for over 200 years is printed paper, the cash. Access via prepaid cards or mobile apps are further concretizations that are conceivable for the digital central bank money.
If a central bank opts for a account -based system, it must set the circle of actors in a next step, which is allowed to open an account. Two scenarios mark the end points of a spectrum.4 If the central bank wants to minimize uncertainty about the mode of operation of the digital central bank money, it restricts the circle of users to commercial banks and non-bank financial institutions (NBFI) such as insurance. In this case, the digital central bank money is comparable to the reserves. Course banks receive an additional alternative to handle payments with each other, the digital central bank money supplements "Real Time Gross Settle folder" systems such as Target2. For the NBFI, there is the possibility of handling payments to other NBFI and/or commercial banks via the accounts at the central bank, you no longer have to use your own deposits at the commercial banks. The private households are hardly affected by this variant of the digital central bank money.
At the other end of the spectrum, the option of allowing all private households and companies to allow an account management to the central bank.5 Since it is hardly conceivable that the central banks go into day -to -day business with the end customers, the account management is plausible to private companies. Apart from the concrete handling, it is central from an economic point of view how the private persons react to the additional option: Does massive portfolio liabilities come away from the commercial banks and towards the central bank? What are the adaptation reactions of the commercial banks? Is there a massive capital import because, for example, an EU country like Sweden has to allow all EU citizens to open such account openings? In the absence of experience, hardly any serious estimates are possible here, plausibility considerations must take their place. Given the imponderablesAs expected, the central banks shy away from installing this extreme variant of the digital central bank money. This also applies to the Swedish Reichsbank, which has decided to implement the implementation of a value-based digital bank money as a pilot project, which does not want to see this in this no preliminary decision on the introduction of the "central bank account for everyone ".6 The general access to the central bank balance will not be at the beginning, but at most at the end of a development or implementation process.
The last design feature to be named is the interest rate of the deposits at the central bank. The choice of this interest rate is an additional monetary policy instrument that decisively decides on the reactions of the private individuals mentioned and thus the mode of operation of the digital central bank money.
On the technical design of the digital central bank money
In order to be able to successfully carry out and complete a payment process, the payer must be identified as a keeper of a corresponding account for a account -based system. In the event of transfers between private individuals, this task takes over the commercial bank, and the central bank takes over for payments between commercial banks. Because this intermediary does not bear the risk of correct transfers, it requires his own interest to minimize this risk of using the best possible security technology and/or the restriction to a specific customer group. 7
In the case of a value or token-based system, the authenticity of the token is required. Here the recipient of the payment bears the risk of a fake token. With a token in the form of cash, the check for counterfeit money is still quite simple, with a digital value representative, this is usually more complex. Because digital tokens are comparatively easy to copy, the risk of a double (or multiple) expenditure of the same token is created. In order to prevent such a double spending, the distributed Ledger technology (DLT) is ideal from a technological point of view.
The DLT describes a class of technologies that save condition information in a distributed network. The best -known representative of the DLT is the blockchain known from the cryptocurrencies.8 Within the blockchain, transaction data (payments) are stored in a blocked order. The historical payment process of each token can be reconstructed from this information. The technologies have in common that they have to achieve a consensus via the stored conditions without using a trustworthy third party. With the Bitcoin blockchain, this is done by a Proof of Work: The solution to a cryptographic problem determines the participant who is authorized to continue the transaction history. This ensures that each network node has the same set of information, it is therefore easy to check the authenticity of a token. It is particularly important that the participants do not have to trust each other in the case of Bitcoin blockchain, there is a shift in trust. 9 The users do not necessarily have to know each other in order to be able to handle a payment, rather they remain pseudonymous. This type is known as an open blockchain, every knot can freely join the network or leave it. To differentiate between this must be the closed blockchains, in which there is a defined circle of authorized bodies that can read or add information from the blockchain. This requires a central authority that decides on admission. With regard to electronic payment transactions, the legal regulations provide for high demands on customer identification (Know Your Customer-KYC) and money laundering prevention (anti-Money Lundering-AML). This results in the need for the system operator to be able to assign the use of the token's customers. The central bank cannot choose the design freely, it has to choose a closed system.
The central banks have certainly perceived the DLT as candidates for a digital central bank money. Advantages of this technology include e.g. B. increased transparency, improved data integrity and increased resilience due to the loss of the Single Point of Failure. Pseudonymity is also often called by the DLT supporters. Analogous to cash, the technology enables payment processing without knowledge of identity. In addition, efficiency gains from the use of the DLT are possible, since due to the uniform records, the need for coordination and thus costs can be reduced. 10
The lack of scalability (inadequate capacity) and theEnergy intensity of the DLT. An example: The electricity requirement necessary for the processing of all Canadian financial transactions using Bitcoin blockchain would exceed the entire current Canadian electricity consumption.11 A departure from the Proof of Work as a consensus mechanism is currently essential, superior alternatives are currently being developed. Abadi and Brunnermeier speak of a blockchain trilemma, whereby of the three targets "Correctness of the transactions", "decentralized implementation" and "cost efficiency" only two can be met.13 With the Bitcoin blockchain, the first two goals are achieved, and cost efficiency must be dispensed with. In the case of digital central bank
nmoney, cost efficiency gains, on the other hand, you have to give up the goal of decentralization. In summary, it should be stated that from today's perspective the DLT is not superior. However, given the rapidly progressive development of the DLT, an ongoing new evaluation of this assessment is necessary.
The basic idea of the digital central bank money is very simple: private households and companies are given direct access to the central bank balance by opening an account and forming deposits at the central bank. The idea of the "account for everyone at the central bank" is not new, it can be found, for example, at Tobin.3 In previous years, implementation failed due to the lack of technical feasibility of a local account management. Today it is only in the decision -making authority of the central banks to determine the details of the design features.
Private's deposits as well as the traditional central bank money (cash and reserves) are a binding nature of the central bank. Depending on the form of design, the digital central bank money can be closer to cash or closer to the reserves. While cash is circulating in the economy but is not electronic, the credit of the commercial banks (reserves) are digital, but do not circulate. The digital central bank money combines the properties: digital units of the central bank money are generally tradable and circulate in the economy.
The digital central bank money is a central system. In contrast to privately emitted digital currencies such as Bitcoin or Ethereum, the central bank has a clearly identifiable issuer who guarantees the functioning of the system and decides discretionary about the "rules of the game". A responsible institution should be an advantage for the general acceptance of digital money. If a central bank primarily wants to compensate for the displacement of the cash, it chooses a value-based (value-based) DZBG. A distinction must be made between the account-based (account-based) DZBG, which is to be regarded as an extension of the monetary policy instruments. In the case of value -based digital central bank money, private individuals do not keep the claim to the central bank in the form of an account, but in the form of value representatives, so -called tokens. The simplest and has been practiced for over 200 years is printed paper, the cash. Access via prepaid cards or mobile apps are further concretizations that are conceivable for the digital central bank money.
If a central bank opts for a account -based system, it must set the circle of actors in a next step, which is allowed to open an account. Two scenarios mark the end points of a spectrum.4 If the central bank wants to minimize uncertainty about the mode of operation of the digital central bank money, it restricts the circle of users to commercial banks and non-bank financial institutions (NBFI) such as insurance. In this case, the digital central bank money is comparable to the reserves. Course banks receive an additional alternative to handle payments with each other, the digital central bank money supplements "Real Time Gross Settle folder" systems such as Target2. For the NBFI, there is the possibility of handling payments to other NBFI and/or commercial banks via the accounts at the central bank, you no longer have to use your own deposits at the commercial banks. The private households are hardly affected by this variant of the digital central bank money.
At the other end of the spectrum, the option of allowing all private households and companies to allow an account management to the central bank.5 Since it is hardly conceivable that the central banks go into day -to -day business with the end customers, the account management is plausible to private companies. Apart from the concrete handling, it is central from an economic point of view how the private persons react to the additional option: Does massive portfolio liabilities come away from the commercial banks and towards the central bank? What are the adaptation reactions of the commercial banks? Is there a massive capital import because, for example, an EU country like Sweden has to allow all EU citizens to open such account openings? In the absence of experience, hardly any serious estimates are possible here, plausibility considerations must take their place. Given the imponderablesAs expected, the central banks shy away from installing this extreme variant of the digital central bank money. This also applies to the Swedish Reichsbank, which has decided to implement the implementation of a value-based digital bank money as a pilot project, which does not want to see this in this no preliminary decision on the introduction of the "central bank account for everyone ".6 The general access to the central bank balance will not be at the beginning, but at most at the end of a development or implementation process.
The last design feature to be named is the interest rate of the deposits at the central bank. The choice of this interest rate is an additional monetary policy instrument that decisively decides on the reactions of the private individuals mentioned and thus the mode of operation of the digital central bank money.
On the technical design of the digital central bank money
In order to be able to successfully carry out and complete a payment process, the payer must be identified as a keeper of a corresponding account for a account -based system. In the event of transfers between private individuals, this task takes over the commercial bank, and the central bank takes over for payments between commercial banks. Because this intermediary does not bear the risk of correct transfers, it requires his own interest to minimize this risk of using the best possible security technology and/or the restriction to a specific customer group. 7
In the case of a value or token-based system, the authenticity of the token is required. Here the recipient of the payment bears the risk of a fake token. With a token in the form of cash, the check for counterfeit money is still quite simple, with a digital value representative, this is usually more complex. Because digital tokens are comparatively easy to copy, the risk of a double (or multiple) expenditure of the same token is created. In order to prevent such a double spending, the distributed Ledger technology (DLT) is ideal from a technological point of view.
The DLT describes a class of technologies that save condition information in a distributed network. The best -known representative of the DLT is the blockchain known from the cryptocurrencies.8 Within the blockchain, transaction data (payments) are stored in a blocked order. The historical payment process of each token can be reconstructed from this information. The technologies have in common that they have to achieve a consensus via the stored conditions without using a trustworthy third party. With the Bitcoin blockchain, this is done by a Proof of Work: The solution to a cryptographic problem determines the participant who is authorized to continue the transaction history. This ensures that each network node has the same set of information, it is therefore easy to check the authenticity of a token. It is particularly important that the participants do not have to trust each other in the case of Bitcoin blockchain, there is a shift in trust. 9 The users do not necessarily have to know each other in order to be able to handle a payment, rather they remain pseudonymous. This type is known as an open blockchain, every knot can freely join the network or leave it. To differentiate between this must be the closed blockchains, in which there is a defined circle of authorized bodies that can read or add information from the blockchain. This requires a central authority that decides on admission. With regard to electronic payment transactions, the legal regulations provide for high demands on customer identification (Know Your Customer-KYC) and money laundering prevention (anti-Money Lundering-AML). This results in the need for the system operator to be able to assign the use of the token's customers. The central bank cannot choose the design freely, it has to choose a closed system.
The central banks have certainly perceived the DLT as candidates for a digital central bank money. Advantages of this technology include e.g. B. increased transparency, improved data integrity and increased resilience due to the loss of the Single Point of Failure. Pseudonymity is also often called by the DLT supporters. Analogous to cash, the technology enables payment processing without knowledge of identity. In addition, efficiency gains from the use of the DLT are possible, since due to the uniform records, the need for coordination and thus costs can be reduced. 10
The lack of scalability (inadequate capacity) and theEnergy intensity of the DLT. An example: The electricity requirement necessary for the processing of all Canadian financial transactions using Bitcoin blockchain would exceed the entire current Canadian electricity consumption.11 A departure from the Proof of Work as a consensus mechanism is currently essential, superior alternatives are currently being developed. Abadi and Brunnermeier speak of a blockchain trilemma, whereby of the three targets "Correctness of the transactions", "decentralized implementation" and "cost efficiency" only two can be met.13 With the Bitcoin blockchain, the first two goals are achieved, and cost efficiency must be dispensed with. In the case of digital central bank
nmoney, cost efficiency gains, on the other hand, you have to give up the goal of decentralization. In summary, it should be stated that from today's perspective the DLT is not superior. However, given the rapidly progressive development of the DLT, an ongoing new evaluation of this assessment is necessary.