Speakers/Panelists

Itai Agur | International Monetary Fund | external page Website

Designing Central Bank Digital Currencies 
(with Anil Ari and Giovanni Dell'Ariccia)
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Download Presentation Slides (PDF, 902 KB)

We study the optimal design of a central bank digital currency (CBDC) in an environment where agents sort into cash, CBDC and bank deposits according to their preferences over anonymity and security; and where network effects make the convenience of payment instruments dependent on the number of their users. CBDC can be designed with attributes similar to cash or deposits, and can be interest-bearing: a CBDC that closely competes with deposits depresses bank credit and output, while a cash-like CBDC may lead to the disappearance of cash. Then, the optimal CBDC design trades off bank intermediation against the social value of maintaining diverse payment instruments. When network effects matter, an interest-bearing CBDC alleviates the central bank's tradeoff.

Morten Linnemann Bech | Bank for International Settlements | external page Website

Where’s my money? Why payments need networks and networks need payments 

Aleksander Berentsen | University of Basel | external page Website

Monetary policy implications of central bank digital currencies

Rainer Böhme | University of Innsbruck | external page Website

The technology of retail central bank digital currency 
(with Raphael Auer)

Central bank digital currencies (CBDCs) promise to provide cash-like safety and convenience for peer-to-peer payments. To do so, they must be resilient and accessible. They should also safeguard the user’s privacy, while allowing for effective law enforcement. Different technical designs satisfy these attributes to varying degrees, depending on whether they feature intermediaries, a conventional or distributed infrastructure, account- or token-based access, and retail interlinkages across borders. We set out the underlying trade-offs and the related
hierarchy of design choices.

Florian Böser | ETH Zurich | Website

Monetary Policy with a Central Bank Digital Currency: The Short and the Long Term
(with Hans Gersbach)
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We examine how the introduction of an interest-bearing central bank digital currency (CBDC) impacts bank activities and monetary policy. Depositors can switch from bank deposits to CBDC as a safe medium of exchange at any time. As banks face digital runs, either because depositors have a preference for CBDC or fear bank insolvency, monetary policy can use collateral requirements (and default penalties) to initially increase bankers' monitoring incentives. This leads to higher aggregate productivity. However, the mass of households holding CBDC will increase over time, causing additional liquidity risk for banks. After a certain period, monetary policy with tight collateral requirements generating liquidity risk for banks and exposing bankers to default penalties would render banking non-viable and prompt the central bank to abandon such policies. Under these circumstances, bankers' monitoring incentives will revert to low levels. Accordingly, a CBDC can at best yield short-term welfare gains.

Darrell Duffie | Stanford University | external page Website

What might central banks do about digital currencies?  (Keynote Talk)

Hans Gersbach | ETH Risk Center| Website

A Minting Mold for the eFranc: A Policy Paper
(with Roger Wattenhofer)
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We suggest a blueprint for an eFranc as a possible complement for the Swiss monetary system to ensure the long-term stability of its money. An eFranc is a non-interest-bearing digital form of the legal tender available to the public. The public can convert banknotes or part of its bank deposits into eFrancs, subject to the banks’ ability to obtain the corresponding amount of eFrancs from the central bank. There is free conversion of eFrancs into bank deposits (and into banknotes). For the technical implementation of the eFranc, we suggest a two-layer system combining a permissioned asynchronous blockchain without consensus which provides a secure environment for validating transactions (base layer) plus a peer-to-peer payment network (top layer).

Charles M. Kahn | University of Illinois | external page Website

Eggs in one basket: Security and Convenience of digital currencies 
(with Francisco Rivadeneyra and Russell Wong)
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Download Presentation Slides (PDF, 679 KB)

Digital currencies store balances in anonymous electronic addresses. We analyze the trade-offs between safety and convenience of aggregating balances in addresses, electronic wallets and banks. In our model agents balance the risk of theft of a large account with the cost to safeguarding a large number of passwords of many small accounts. Account custodians (banks, wallets and other payment service providers) have different objectives and tradeoffs on these dimensions; we analyze the welfare effects of differing industry structures and interdependencies, and in particular the consequences of “password aggregation”programs which in effect consolidate risks across accounts.

Cyril Monnet | University of Berne | external page Website

The economics of permissioned decentralized ledger
(with Raphael Auer and Hyun Song Shin)

Central bank digital currencies (CBDCs) promise to provide cash-like safety and convenience for peer-to-peer payments. To do so, they must be resilient and accessible. They should also safeguard the user's privacy, while allowing for effective law enforcement. Different technical designs satisfy these attributes to varying degrees, depending on whether they feature intermediaries, a conventional or distributed infrastructure, account- or token-based access, and retail interlinkages across borders. We set out the underlying trade-offs and the related hierarchy of design choices.

Linda Schilling | École Polytechnique CREST | external page Website

Central bank digital currency: When price and bank stability collide
(with Jésus Fernández-​Villaverde, Daniel R. Sanches and Harald Uhlig)

An account-based central bank digital currency has the potential to replace demand-deposits in private banks. In that case, the central bank invests in the real economy and takes over the role of maturity transformation to allow risk-sharing among depositors. Her function as intermediary exposes the CB to demand-liquidity or 'spending' shocks by her depositors. Since demand-deposit contracts are nominal, high aggregate spending not necessarily demands excessive liquidation of real investment by the central bank. A run on a central bank can, therefore, manifest itself either as a standard run characterized by excessive real asset liquidation (rationing) or as a run on the price level where a small supply of real goods meets a high demand. The central bank thus trades off price stability against the excessive liquidation of real goods.

Harald Uhlig | University of Chicago | external page Website

Cryptocurrencies, currency competition, and the impossible trinity (Keynote Talk)
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Download Presentation Slides (PDF, 245 KB)

We analyze a two-country economy with complete markets, featuring two national currencies as well as a global (crypto)currency. If the global currency is used in both countries, the national nominal interest rates must be equal and the exchange rate between the national currencies is a risk-adjusted martingale. Deviation from interest rate equality implies the risk of approaching the zero lower bound or the abandonment of the national currency. We call this result ``Crypto-Enforced Monetary Policy Synchronization'' (CEMPS). If the global currency is backed by interest-bearing assets, additional and tight restrictions on monetary policy arise. Thus, the classic Impossible Trinity becomes even less reconcilable.

Roger Wattenhofer | ETH Zurich | Website

Cash is Dead, Long Live CBDC

It is foreseeable that the long reign of coins and banknotes will come to an end, as they will be replaced with so-called central bank digital currency, CBDC for short. Some central banks are already pushing ahead with the development of CBDC. In Sweden CBDC is known as the e-krona, in China as DC/EP. In my talk I will briefly sketch how to implement a modern CBDC. The philosophy of CBDC is remarkably similar to that of hard cash. The frontend of CBDC is similar to payment apps such as Google or Apple Pay. CBDC's backend, on the other hand, inherits technology from cryptocurrencies. In particular we envision that the backend should be a permissioned version of the ABC system, which fundamentally differs from both classic blockchains as well as systems based on byzantine agreement. Recently, Facebook researchers have published FastPay, the first technical paper of their upcoming Libra cryptocurrency, which cites ABC as their main inspiration. Apart from technology, we can discuss some of the user experience challenges: How will a CBDC bank account look like? What if there is a power outage or an internet failure? How should private banks position themselves in a CBDC world? What about privacy? Hopefully, this presentation will be highly interactive, with lots of audience questions.

Randall Wright | University of Wisconsin-Madison | external page Website

A problem/puzzle in modeling e-​money as a beneficial institution