CBDC Plus: Why CBDC Proposals Need to Become More Comprehensive to Succeed

The innovation that is associated with developing a digital currency has provided for a unique opportunity to reconsider how consumers can access payment mechanisms and conduct retail banking following the emergence of new fintech technologies. As such, this is a prescient time for policy makers to reconsider financial reform efforts to leverage new technological developments as a means of making the payments system more efficient. This paper considers some of the challenges facing Central Banks as they attempt to navigate these pressing challenges. In particular, the paper will assess the relative prospects for success for some of the more popular CBDC proposals and identify potential avenues for Central Banks to improve the efficiency of their retail payment systems. Part One will examine some of the more prominent proposals that utilize a combination of increasing access to financial services through a digitization of conventional bank notes to be supplied either directly as accounts operated by Central Banks, or through conventional intermediaries that utilize the payment rails to be established by a Central Bank to provide access to their customers to digital banknote equivalents. Part Two will consider how these present efforts can be enhanced by re-examining the roles that Central Banks play in enhancing economic efficiency. Attention will be paid to recent advances pioneered in fintech in order to reimagine the role played by Central Banks in facilitating the circulation of money and credit throughout the economy. Part Three will address some of the criticisms of the existing CBDC proposals and will offer thoughts on how to mitigate some of the risks involved including the incorporation of a national identity and credit reporting feature into CBDC models as a method of reducing transactions costs.