Central Bank Digital Currency and Sovereign Money Accounts
Since about 2013/14 scholars have been looking for an intermediate or gradual approach to monetary reform. If a 'big bang' transition from private bankmoney to sovereign central-bank money could not be achieved anytime soon, something less radical might be attainable. The two approaches being in the spotlight are
► central bank issued digital currency (CBDC) based on blockchain technology, and
► sovereign money accounts as an alternative option to bank giro accounts.
Further ideas relate to
- central bank accounts for everybody
- mobile use of sovereign money accounts
- helicopter money
- safe deposits by way of a voluntary 100% reserve on individual deposits.
The common feature of the former options is to introduce non-cash central-bank money into public circulation, but without directly challenging the present bankmoney privilege. The idea is about giving the nonbank public the option to choose between bankmoney and central-bank money. The two would exist in parallel. By some supporters such an approach is idealised as 'combining the best of two worlds', while others, more appropriately, hope for the approach to be a half-way house to full-blown monetary reform that would put an end to the bankmoney privilege. Over time, the central-bank money in public circulation would possibly drive out the bankmoney, thus reverting the historical wrong-headed development of the last hundred years by which bankmoney has driven out sovereign money to about 90 per cent now.
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Contributions by other scholars from the International Monetary Reform Movement include
• Edgar Wortmann (Ons Geld, Netherlands) makes the case for central bank digital currency side by side with bankmoney
> Radical monetary reform
• Ben Dyson and Graham Hodgson (Positive Money, London) have developed a plan for > Digital Cash. Why Central Banks Should Start Issuing Electronic Money.
• In an article in the real-world economics review, no.68, 2014, Trond Andresen explains the concept of a > system of purely electronic payments that might help to make the transition from bankmoney to sovereign money
On 17 June 2016 the Governor of the Bank of England, Mark Carney, announced to extend access to the BoE's payment system to non-bank payment service providers. This rather inconspicuous technical announcement might turn out to be a disruptive innovation for it could possibly pave the way for safe separate accounts, that is, the equivalent of a 'central-bank account for everybody'. This in turn might prove to be the beginning of the end of the bankmoney regime.
> Progress update on the Bank’s blueprint for a new RTGS system, Bank of England, June 2016.
> UK banks to lose their status as gatekeepers to the payment system, Positive Money
• The approach to a digital currency under control of central banks is explained and modelled in a BoE working paper by
J. Barrdear and M. Kumhof > The macroeconomics of central bank issued digital currencies, July 2016.
• Prior to this, Ben Broadbent had discussed the possibility of introducing a central-bank digital currency> Central banks and digital currencies, Bank of England, 2 March 2016, as a PDF>
• The Swedish Riksbank is definitely poised to come up with a digital currency scheme within two years > Sweden's Riksbank eyes digital currency, Financial Times, 15 Sep 2016.
• David Andolfatto, Vice President of the St. Louis Fed, had put forth a proposal for digital central-bank money in public use, 'Fedwire for all' so to say> Fedcoin: On the Desirability of a Government Cryptocurrency, Macromania, 3 Feb 2015.
Prior to this, J.P. Koning had published a blog on > Fedcoin, 19 Oct 2014. - Robert Sams comments on this at > Which Fedcoin?
• The Bank for International Settlements, Basel, has released a report in favour of central bank issued> digital currency. 23 Nov 2015.
• China's central bank, too> aims to issue digital currency, South China Morning Post, 22 Jan 2016.
• Marilyne Tolle, Bank of England> Central bank digital currency: the end of monetary policy as we know it? Bank Underground, 25 July 2016
• An explanation of the approach by Ellen Brown > Central Bank Digital Currencies: A Revolution in Banking?, Web of Debt Blog, 16 Sep 2016.
safe deposits by 100%-banking
• Among those who have been making the case for 100% individually backed- up deposits is Thomas Mayer, Senior Fellow at the Center for Financial Studies, Frankfurt, and former chief economist of Deutsche Bank
> A Copernican Turn in Banking Union Urgently Needed, CEPS Policy Brief, No. 297, July 2013.
Also cf. > Banish fractional reserve banking for real reform, Financial Times, 24 June 2013; re-published at Thomas Attwood Blog, 24 June 2013> Banish fractional reserve banking for real reform.