Assurance for Delivery

Central Banks are assessing the possibility to release National Digital Currencies that could potentially substitute cash. This idea will allow Central Banks to have absolute control of all the money supplies. On top of that, they will compete with Commercial Banks for deposit accounts.

An important technology that can contribute to this development is Blockchain. The distributed ledger technology makes it possible for anyone to open a deposit account directly at the Central Bank. This feature alone will remove direct intermediation as it also opens the possibility to create a full reserve banking system.

However, there is a catch. The theoretical benefit of a full reserve banking system does not consider the natural hierarchy of money. If a Central Bank controls a fixed amount of money in the economy than additional “cash” products will be developed, which will lead to an expansion of the overall quantity of money.

A Digital National Currency can also prevent financial crime and support the overall monetary policies but it also represents a threat in consumers privacy finances.

Currently the European Central Bank, the Bank of England and Sweden Central Bank are assessing the possibility of adopting a digital currency as an alternative form of payment. Essential characteristics are yet to be defined.

In line with the above, FiSer has written a paper that provides recommendations for the adoption of Digital Euro where we discuss desirable characteristics, the implementation approach and adoption challenges.