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1. Central Bank Digital Currency: The Risks and the Myths

Author:
Nicholas Anthony and Norbert Michel
Publication Date:
01-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Central bank digital currencies (CBDCs) have the potential to radically transform the American financial system—ultimately usurping the private sector and endangering Americans’ core freedoms. Although CBDCs have gained the attention of politicians, central bankers, and the tech industry, this experiment should be left on the drawing board. This paper provides a summary of why Congress should explicitly prohibit the Federal Reserve and the Department of the Treasury from issuing a CBDC.
Topic:
Finance, Economy, Fiscal Policy, Banking, and Digital Currency
Political Geography:
North America and United States of America

2. Stablecoins, United States Competitiveness, and the Cloud

Author:
Michael B Greenwald
Publication Date:
03-2023
Content Type:
Journal Article
Journal:
Brown Journal of World Affairs
Institution:
Brown Journal of World Affairs
Abstract:
Recent geopolitical events and the overleveraging of U.S. sanctions has strained the relationship between the U.S. dollar and other world financial powers, bringing the current system—fundamentally grounded in the 1944 Bretton Woods Agreement—to a critical inflection point. Although the past 80 years has seen a global financial system that hinged on the chosen policy of the United States, adversaries and allies alike are actively searching for ways to diversify from a dollar-centric system. Simultaneously, the innovation of financial technology has led to the creation of blockchain based, non-state currencies and demand for more efficient settlement of transactions. These trends have given rise to a crucial moment for infrastructure that underpins these innovations: the cloud and U.S. financial policy. In developing a long-term strategy that supports a robust global financial system, policymakers should heed the revolutionary potential of innovation and the cloud, specifically related to stablecoins and Central Bank Digital Currencies (CBDCs).
Topic:
Infrastructure, Digital Currency, Competition, and Stablecoins
Political Geography:
North America and United States of America

3. Privacy in cross-border digital currency: A transatlantic approach

Author:
Giulia Fanti and Nadia Pocher
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Atlantic Council
Abstract:
As a growing number of countries explore Central Bank Digital Currencies (CBDCs) for the domestic context, multi-country cross-border CBDCs pilots are also proliferating. Cross-border CBDCs could make cross-border payments faster, cheaper, and simpler. However, for any cross-border CBDC to unlock these benefits and be widely adopted, it must address key concerns, chief among them risks around privacy and transparency of data. This article illustrates how various technical design choices can affect the privacy and transparency of cross-border CBDCs. For instance, architectural choices about the structure of a cross-border CBDC and representational choices about how transactions are encoded in the underlying software can have far-reaching implications for privacy and transparency—both in a domestic context and for cross-border transactions. Many of the cross-border CBDC pilot studies to date have (understandably) adopted the technical designs provided by enterprise distributed ledger platforms. However, some of these designs make tradeoffs regarding privacy, efficiency, and/or security. Whether these tradeoffs are acceptable is a matter of policy, and requires coordination between different regulators and central banks. In view of these implications—and some of the corresponding tensions that arise—we argue that the US and the EU should work together alongside other partners to create the technological and regulatory environment to enable privacy-preserving cross-border CBDCs. The US and the EU should seize the emergence of CBDCs as an opportunity to finally establish a transatlantic privacy framework, and clarify its interplay with the prevention of money laundering and financing of terrorism (AML/CFT/CPF). More broadly, both should harness the clout of their combined financial systems to develop digital asset regulation and standards with a global reach and democratic values. These regulatory developments would not only streamline regulatory guidelines, but they could also directly impact and ease the technical development of a cross-border CBDC.
Topic:
Privacy, Currency, Transatlantic Relations, and Digital Currency
Political Geography:
Europe, Canada, North America, and United States of America

4. South Korea's Critical Moment in Digital Currency Policymaking: Between Regulating Cryptocurrencies and Launching a Central Bank Digital Currency (CBDC)

Author:
June Park
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
Why is South Korea pilot-testing its Central Bank Digital Currency (CBDC), and what made it shift from non-issuance to consideration? This paper investigates the Bank of Korea (BOK)’s CBDC-related developments amid the geopolitical contest between the U.S. and China. It examines the Moon Jae-in administration’s defiance of decentralized finance (DeFi) and the BOK’s sudden shift from non-issuance to potential issuance, which led to expedited research, development, and pilot-testing of CBDCs. As in the case of the digital yuan, the BOK envisions a hybrid architecture for the digital won, wherein central banks and associated partner institutions are CBDC distributors, though they are distinguished by placing the digital won on distributed ledger technology rather than by centrally controlling it. However, South Korea’s previously rash decision to forego DeFi under an undemocratic process has deprived the country of the time and opportunity to develop new innovations as a leading country in the digital frontier. By sticking only to digitalizing centralized finance, the country now aims to be in “standby” mode for its CBDC launch if and when required, so as not to fall behind in digital financial architecture. This paper scrutinizes the South Korean government’s moves on crypto and CBDCs and argues that 1) the Moon administration has shown incapability in addressing DeFi amid the crypto boom and bust, and 2) the BOK’s shift from non-issuance to potential issuance of the digital won is driven by its interest to uphold central bank independence amid swaying geopolitics between the U.S. and China and an unpredictable upcoming presidential election in South Korea.
Topic:
Economics, Elections, Finance, Cryptocurrencies, and Digital Currency
Political Geography:
China, Asia, South Korea, North America, and United States of America

5. Digital Currencies' Role in Facilitating Ransomware Attacks: A Brief Explainer

Author:
Kristine Johnson and Michael Garcia
Publication Date:
05-2021
Content Type:
Policy Brief
Institution:
Third Way
Abstract:
This paper details how Bitcoin—the most popular digital currency—is used to facilitate ransomware attacks and how criminals try—and sometimes fail—to cover their tracks. Understanding how criminals use digital currencies for ransomware attacks can lead policymakers to solutions in thwarting and enforcing cybercrimes.
Topic:
Cybersecurity, Digital Economy, Bitcoin, Digitalization, and Digital Currency
Political Geography:
North America and United States of America

6. Central Bank Digital Currency and Governance: Fit for Purpose?

Author:
Pierre Siklos
Publication Date:
04-2021
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
As digital forms of payment become increasingly popular, especially during the COVID-19 pandemic, cash is no longer king. Central banks are turning their attention toward central bank digital currency (CBDC) to replace coins and bills and to provide other types of services through digital technology. CBDC can also facilitate cross-border transactions through the use of internationally accepted currencies such as the euro and the US dollar. This paper explores the many tailwinds and headwinds that will affect the implementation of a CBDC.
Topic:
Governance, Digital Economy, Banks, and Digital Currency
Political Geography:
North America, Global Focus, and United States of America