Thank you for the analysis. I am unclear on the difference between CBDC and digital payments, since both are fiat currency, the banking system is backed by reserves at the central bank, and retail payments aren't 100% backed by cash (i.e. fractional banking). A digital payment already makes use of a digital fiat currency. So what's new about a CBDC, especially if the issuing central bank will use an intermediary? This seems like the existing system today.
It's essentially digital cash notes so cash notes or coins in digital format that are legal tender. The whole idea is that payments are a public good and Central Banks mostly see them as complimentary to the existing system. If the ability to make payments is a public good and the world is going cashless then the central bank needs to offer a payment system. Enter CBDCs.
Electronic payments are also digital cash notes because of fractal banking. And the central bank ultimately guarantees liquidity in a country as a lender of last resort, so in that sense, has ultimate liability over the currency, cash or electronically used. So it's a bit unclear still what the difference is between a CBDC and an electronic payment in local currency today. But anyway, thank you for the insights!
Thank you for the analysis. I am unclear on the difference between CBDC and digital payments, since both are fiat currency, the banking system is backed by reserves at the central bank, and retail payments aren't 100% backed by cash (i.e. fractional banking). A digital payment already makes use of a digital fiat currency. So what's new about a CBDC, especially if the issuing central bank will use an intermediary? This seems like the existing system today.
It's essentially digital cash notes so cash notes or coins in digital format that are legal tender. The whole idea is that payments are a public good and Central Banks mostly see them as complimentary to the existing system. If the ability to make payments is a public good and the world is going cashless then the central bank needs to offer a payment system. Enter CBDCs.
Electronic payments are also digital cash notes because of fractal banking. And the central bank ultimately guarantees liquidity in a country as a lender of last resort, so in that sense, has ultimate liability over the currency, cash or electronically used. So it's a bit unclear still what the difference is between a CBDC and an electronic payment in local currency today. But anyway, thank you for the insights!