The technological factor in the conception of Central Bank digital currencies

Is cash disappearing? There was an acceleration in non-cash payments during the COVID-19 pandemic, but the use of non-cash payments was already on the rise. ‘Plastic and contactless money,’ such as debit and credit cards and mobile payment apps, are widespread. Cryptocurrencies, from Bitcoin onwards, have become mainstream over the last decade.1 Such new forms of money and payments may lead to improvements and present diffculties, for example, effciency, costs, compliance with AML and KYC, resistance to evasion, energy requirements, governance, on/offine availability, fnality, customer protection, and systemic risks. Noticeably, the development of a form of ‘private’ digital currencies, such as some stablecoins and proprietary digital tokens of Big Tech companies, must also be mentioned. The former includes cryptocurrencies run by private companies whose value is kept stable, for example, by pegging to fat currencies or algorithmically controlling supply against demand. These have a predominant role in cryptocurrency and a consistent market cap but may sometimes run non-regulated and transparently, constituting a potential risk.2 The latter includes experiments like Facebook’s Libra/Diem, now suspended, a digital currency and payment system comprising a few billion users in a crossnation cross-regulation monetary framework. It is reasonable to imagine that a push for state-controlled digital currencies is also motivated by the competition with such private frameworks. The actual impact of any digital currency and payment framework strongly depends on the supporting technology that strictly defnes their properties. The fundamental technological aspect is generally underestimated. Not only is it often assumed that technology could overcome any issue, but even assuming the feasibility of an approach, the costs of one system over another, and the risks and opportunities that the new forms of money have concerning each other and cash, have not been thoroughly evaluated.