11 Essential Resources to Understand Digital Money and CBDCs

We've removed the paywall on select articles during this current economic crisis. Become a member of the MEDICI Inner Circle and join us in the fight against the pandemic – we will donate 50% of the annual membership fees to COVID-19 relief efforts.

CBDC is an evolving space, and the best thing we can do to help the ecosystem understand it better is by providing credible reference material around the subject. Hence, in this article, we recommend articles and discussion papers to help you gain a broader perspective and to analyze trends and industry dynamics for your firms. These articles serve as a supplement to MEDICI Studio’s video series titled “How FinTech Works” that focuses on CBDC.

The reading list below, which consists of 11 articles in total, is organized in sequential order. We recommend that you read all these articles in the same sequence.

However, if you are short on time, we can help you pick what to read:

For your quick reference, we’ve created a concise summary of each paper/article:

Paper #00: It’s time to talk about money

What’s inside: Understand the role, position, thinking, and motivations of Central Banks

Snippets: This is a speech given by Sir Jon Cunliffe, Deputy Governor Financial Stability, Member of the Monetary Policy Committee, Member of the Financial Policy Committee, and Member of the Prudential Regulation Committee. In this speech, Jon Cunliffe looks at the future of money. He examines: 1. the use of cash; 2. the evolution of commercial bank money; 3. the rise of crypto assets and stablecoins; 4. opportunities and challenges posed by central bank digital currencies.

Paper #01: Understanding Central Bank Digital Currencies (CBDC)

What’s inside: Assemble the areas and understand the dimensions

Snippets: This paper provides a comprehensive overview of CBDCs for finance and investment professionals, including an overview of a Central Bank’s thought process and the possible implications of introducing a CBDC.

Paper #02: Central Bank Digital Currency | Opportunities, challenges and design

What’s inside: Understand how CBDCs could go from policy motives to real design & implementation

Snippets: This paper explores one of the most important questions: as the issuer of the safest and most trusted form of money in the economy, should we innovate to provide the public with electronic money — or Central Bank Digital Currency (CBDC) — as a complement to physical banknotes? The paper outlines an illustrative ‘platform’ model of CBDC designed to enable households and businesses to make payments and store value. 

Paper #03: The Digital Currency Revolution

What’s inside: Open your mind and rethink money, digital IDs, and how CBDCs and private money could co-exist in the end state

Snippets: The author tries to set out the economic and technological imperatives, discuss the potential impact on the international monetary and financial system, and start to explore the likely repercussions — economic, social, and political. 

Paper #04: Central bank digital currencies

What’s inside: A deeper understanding of CBDCs building on paper #1

Snippets: This report explains the purpose of wholesale central bank digital currencies, as well as the motivations and business case for central banks to adopt wholesale CBDCs. It also outlines key characteristics of such a system, including: who the developer and issuer should be; the technology options and requirements for a successful payments system; the practicality and regulatory challenges; and the possible risks and policy implications. 

Paper #05: Retail CBDCs The next payments frontier

What’s inside: Going into retail payments and understanding case studies across the world.

Snippets: This report examines central bank approaches to and perceptions of retail central bank digital currencies. It explains issues and shortcomings in the existing monetary system that policy-makers are trying to resolve, and describes the use cases where CBDCs can be applied. The report illustrates central banks’ preferred form of CBDCs, underlying technological requirements, and practical considerations for implementation. Finally, the report addresses several concerns about policy & financial stability emphasized by central bankers. 

Paper #06: DIGITAL CURRENCIES | A question of trust

What’s inside: Outlines possible roles for public and private sector players as CBDCs evolve, in developed and developing countries

Snippets: This report centers on the findings of a global opinion poll on public trust in monetary institutions, payment characteristics, and digital currency. The poll was conducted by Ipsos MORI across 13 advanced and emerging countries. The findings suggest that central banks are well-positioned to issue digital currency. In almost all countries, respondents indicated that they would feel most confident in digital money issued by the domestic monetary authority. Respondents globally expressed a lack of confidence in digital money issued by a tech or credit card company, particularly respondents from advanced economies. 

Paper #07: The technology of retail central bank digital currency

What’s inside: Deeper dive into the technologies and frameworks that could be used in CBDCs

Snippets: The question of whether central banks should issue digital currency to the general public has attracted increasing attention. This special feature sketches out some key technological design considerations for a retail CBDC if a central bank decides to issue one. The aim of the article is not to promote or highlight any particular approach, but to lay some groundwork for more systematic discussions. 

Paper #08: Proceeding with caution – a survey on central bank digital currency

What’s inside: BIS survey from January 2019 as the baseline of the global industry situation then

Snippets: This paper takes stock of central banks’ current work and thinking about how new central bank digital currencies (CBDCs) could replace traditional money. This paper is based on a recent survey of central banks, to which 63 responded that represent jurisdictions covering close to 80% of the world population. The survey shows that a majority are collaboratively looking at the implications of a CBDCs. Although many have reached the stage of considering practical issues, central banks appear to be proceeding cautiously, and few report plans to issue a digital currency in the short or medium term. 

Paper #09: Impending arrival – a sequel to the survey on central bank digital currency

What’s inside: BIS survey from January 2020, detailing changes over the last year in the global industry

Snippets: This paper is a sequel to the previous paper #08 listed above. The survey was re-run after a year. The survey results show that most central banks are still working to understand the implications for their jurisdiction, and a significant minority representing a fifth of the world’s population looks likely to issue a CBDC very soon. This survey gives a global overview of work underway, showing that emerging market economies (EMEs) report stronger motivations and a higher likelihood that they will issue CBDCs. 

Paper #10: Central Bank Digital Currencies

What’s inside: A look at common DLT enterprise platforms for usage in CBDC-like programs

Snippets: This report captures the developments occurring in the space of CBDCs with a focus on CBDC as one of the most promising potential applications of Distributed Ledger Technology (DLT). The report discusses the concepts of CBDC-driven Retail Payments System and Wholesale Payment System in terms of solutions they offer and prominent design approaches such as R3’s Corda, Hyperledger’s Fabric, and JP Morgan’s Quorum. The report further compares these three contenders according to their suitability in supporting wholesale payment systems. 

This list has been compiled by Amit Goel and Shubhrendu Khoche.