Digital Currency (DC). Design principles supportive of a shift from bankmoney to DC

Meaning of DC

Digital currency (DC) is a now widely discussed concept of a new form of central bank money. It is meant to circulate side-by-side with bankmoney (i.e. sight or demand deposits), in parallel and competition with it, similar to the still familiar co-existence of central-bank cash with bankmoney.
First design studies on DC were put forward by the the Bank of England, the Swedish Riksbank and the BIS, but also from academic researchers and earlier on from monetary reform initiatives. Meanwhile, most central banks have expressed their interest in such an approach.

Initially, DC was imagined to come in the form of cryptocurrency based on DL or blockchain technology. The new technology, however, is still in its infancy. By comparison, tried and tested ways of how to manage money-on-account and payments from and to accounts are fully suited for implementing DC. For the foreseeable future, DC is very likely to come in the form of money-on-account – which does not exclude the application of cryptographic technology in a more distant future.

Firms and people would chose to maintain a bankmoney account (a bank giro account), or a currency account, or both in parallel.

Read more by downloading the full paper Presentation Digital Currency Design Principles.

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