Central Bank Digital Currencies (CBDCs) E-Book

• Herausgeber: buch & netz
• Kategorie: Fachliteratur
• Sprache: Englisch
• Veröffentlichungsjahr: 2023

Seitenzahl: 155

Beschreibung

The present book contains five contributions relating to the introduction of Central Bank Digital Currencies (CBDCs), i.e., the digital form of state-issued legal tender. It is the by-product of a Colloquium jointly hosted by the Collegium Helveticum (the joint Institute for Advanced Studies of ETH Zurich, the University of Zurich and the Zurich University of the Arts) and the University of Zurich’s Priority Research Program on Financial Market Regulation (URPP FinReg) on 9 May 2023. The contributions to this book provide an in-depth analysis of the following aspects of CBDCs: - Global Financial Architecture and Decentralized CBDC Regimes (by Rolf H. Weber), - The Shift from Private Money into “Unlimited” CBDCs: An Unviable Development or a Chance for Reform and New Opportunities? (by Christian Hofmann), - A Macroeconomic Perspective on retail CBDC and the Digital Euro (by Dirk Niepelt), - Central Bank Digital Currencies: Central Bank Money reaches a new frontier (by Chiara Zilioli) and - The Simple(r) Case for Wholesale Central Bank Digital Currency (by Thomas Moser). The articles constitute an optimal blend between legal, institutional, and economic aspects on CBDCs by high-quality experts, combining the academic and the central bank perspectives.

Leseprobe

© 2023 – CC BY-NC-ND (Book), CC-BY-SA (Text)

Editors: Christos V. Gortsos, Rolf SethePublisher: EIZ Publishing (https://eizpublishing.ch)Layout & Production: buch & netz (https://buchundnetz.com)ISBN:978-3-03805-618-8 (Print – Softcover)978-3-03805-619-5 (Print – Hardcover)978-3-03805-620-1 (PDF)978-3-03805-621-8 (ePub)DOI: https://doi.org/10.36862/eiz-619Version: 1.03-20231023

This work is available in print and various digital formats in OpenAccess. Additional information is available at: https://eizpublishing.ch/publikationen/central-bank-digital-currencies-cbdcs/.

1

Content

Preface by Sebastian Bonhoeffer and Mario Wimmer

Foreword of the editors

Part I: Legal and Macroeconomic Perspectives

Global Financial Architecture and Decentralized CBDC Regimes

Rolf H. Weber

The Shift from Private Money into “Unlimited” CBDCs: An Unviable Development or a Chance for Reform and New Opportunities?

Christian Hofmann

A Macroeconomic Perspective on Retail CBDC and the Digital Euro

Dirk Niepelt

Part II: Central Banking Perspectives

Central Bank Digital Currencies: Central Bank Money reaches a new frontier

Chiara Zilioli

The Simple(r) Case for Wholesale Central Bank Digital Currency

Thomas Moser

Main Body

Preface by Sebastian Bonhoeffer and Mario Wimmer

As the joint institute for advanced studies of ETH Zurich, the University of Zurich, and the Zurich University of the Arts, Collegium Helveticum unites scholars and artists with different backgrounds to provide an inspirational and productive working atmosphere. Witnessing the contentment, engagement, and dedication of the fellows of Collegium Helveticum, the new international fellowship program established in 2021 seems to have struck a nerve.

The Collegium is designed to inspire dialogue across diverse fields and thus create a space to gain experience in successfully communicating both across disciplines and with a broader public. For this to become possible, we provide for a conducive space for colleagues from around the globe to rethink their work and find new lines of inquiry. Located in the historic observatory of ETH Zurich, Collegium Helveticum offers a platform for exchange between different cultures, disciplines, and generations, nurturing that most important resource: diversity. The Collegium in some sense serves as a fallow field within the academic ecosystem, an interstitial space between ploughed fields which contributes to the health of the surrounding crops and ensures the conditions for the ecosystem to flourish in general. As do many other institutes of advanced studies, Collegium Helveticum contributes to fostering the required diversity of perspectives which so often spurs creativity and productivity in academia. My experience as director suggests that institutes for advanced studies like the Collegium constitute indispensable residual spaces in the academic ecosystem of the 21st century.

What Collegium Helveticum can offer is a necessary addition to the busy work in the labs, seminars, studios, and classrooms, i.e., a limited period of protected time, and a space that invites exchange across disciplines and fields of research. In return, the Collegium asks its fellows to contribute to the cultural and intellectual life of Zurich by convening workshops, symposia, conferences, or exhibitions. As a senior fellow at the Collegium Helveticum Professor Christos Gortsos and his local academic partner Professor Rolf Sethe have made the best use of the resources the Collegium can provide by engaging in open-ended and cross-disciplinary conversations. They organized an exciting workshop on “Central Bank Digital Currencies”, a highly interdisciplinary topic with far ranging implications. Following the discussions as much as I could as someone outside the field, I was impressed by the excellent presentations and the engaging discussions between high-profile experts, and I began to better understand what huge impact the introduction of a digital currency by the central banks might have. It is these insights that I take away from each of the exchanges taking place at the Collegium Helveticum that make it such a rewarding task to serve as its director.

During their time at the Collegium, fellows are interlocutors for each other and the local academic and artistic community. Once, having returned to their home institutions, they become not only friends of the house but also ambassadors within a growing international network. At the end of each fellow year, it is with some sadness that I see all fellows moving on. However, experiencing how a workshop that took place at Collegium Helveticum just a couple of months back, turns into a book like the one you are holding in your hands, feels like an unexpected gift. Therefore, I do not want to close without my deep expression of gratitude to our former senior fellow Professor Christos Gortsos and my team who supports numerous fellows each year to guide the events they host at the Collegium to success.

Zurich 17 August 2023

Sebastian Bonhoeffer (Director of the Collegium Helveticum and Professor at the ETH)

Dr Mario Wimmer (Deputy Director of the Collegium Helveticum)

Foreword of the editors

The last decade has seen a variety of developments in the financial sector caused by the emergence of the distributed ledger technology (DLT). It led to innovations such as smart contracts, Bitcoin, and other crypto assets, as well as decentralized finance at large. However, DLT did not only affect the private sector but is also challenging the public sector. In several jurisdiction we are witnessing an intense discussion on the introduction of Central Bank Digital Currencies (CBDCs), which would be the digital form of state-issued legal tender.

The Collegium Helveticum and the University of Zurich’s Priority Research Program on Financial Market Regulation (URPP FinReg) jointly hosted a colloquium on CBDCs on May 9th, 2023. It was based on the initiative of the first co-editor of this book, Christos Gortsos, Professor at the Law School of the National and Kapodistrian University of Athens and, in the academic year 2022/2023, senior fellow at the Collegium Helveticum and visiting researcher at the Faculty of Law of the University of Zurich, in close cooperation with the second co-editor, Professor Rolf Sethe, who made possible and organised the publication of the presentations in this book.

This one-day event, which was opened with a welcome address from Professor Sebastian Bonhoeffer (Director of the Collegium Helveticum) and Professor Rolf Sethe (Head of the URPP FinReg), aimed at providing an in-depth analysis of various aspects of CBDCs. The colloquium was divided into three panels.

The first one focused on selected legal aspects of CBDCs. Professor Marco Dell’Erba (University of Zurich) delivered a speech on the “Relationship between CBDCs and Stablecoins”, followed by Professor Rolf H. Weber (University of Zurich) who developed on the “Global Financial Architecture and Decentralised CBDC Regimes”.The second panel highlighted the views of Central Banks on CBDCs. Dr. Thomas Moser (Swiss National Bank) delivered a speech on “The Perspective of the Swiss National Bank (SNB)” followed by Professor Chiara Zilioli (European Central Bank) who spoke about “The Perspective of the European Central Bank (ECB): Towards a Digital Euro”.The third panel turned to institutional aspects relating to the introduction of CBDCs. Professor Seraina N. Grünewald (Radboud University) gave a presentation on “CBDCs and Central Bank Independence/Accountability”; Professor Christian Hofmann (National University of Singapore) developed on “The Shift from Private Money into ‘Unlimited’ CBDCs: An Unviable Development or a Chance for Reform and New Opportunities?”; and Professor Dirk Niepelt (University of Bern) showed the “Macroeconomic Perspective on Retail CBDCs and the Digital Euro”.

Professor ChristosGortsos moderated the whole colloquium and concluded the same by a summary.

The editors of this book are extremely grateful to the speakers for their insightful presentations and manifold contributions to the discussion. They also wish to warmly thank Professor Sebastian Bonhoeffer and Dr. Mario Wimmer (Deputy Director of the Collegium Helveticum), for their valuable support. Special thanks are finally extended to Mick Lehmann, Andrea Truttmann, Jessica Mani and Lily-Marie Beyeler and Dr. Inke Nyborg for the excellent organization of the event.

The present book contains, in writing, most of the presentations in the colloquium. It is structured in five Chapters under two Parts, which develop on the above-mentioned aspects presented by their authors. Its publication would not have been possible without their great commitment and effort. We warmly thank them.

Even though developments relating to the introduction of CBDCs are constant, we trust that this book will be of value to all those interested in that emerging field, considering the high-level expertise of the contributing authors.

We are very grateful to Dr. Tobias Baumgartner and Sophie Tschalèr from EIZ-Publishing for their support in publishing this book and to Petja Ivanova for her prudent review of the galley proofs.

Zurich, 17 August 2023

Christos V. Gortsos and Rolf Sethe

I

Legal and Macroeconomic Perspectives

Global Financial Architecture and Decentralized CBDC Regimes

Rolf H. Weber

Table of Contents

CBDC as New Element of the Global Financial ArchitecturePrinciples of the Global Financial ArchitectureCBDC as Driver of New Regulatory ComplexitiesTechnical Design of CBDC NetworksNetwork DecentralizationNetwork FormsTheoretical Approach: Competition or Coordination?IntroductionChances and Risks of Regulatory CompetitionChances and Risks of Regulatory CoordinationModel of Co-opetitonPractical Implementation: Designs of Ongoing ProjectsIncreased Activities of Central BanksCommon Key FeaturesOptions for InteroperabilityLegal and Regulatory IssuesOutlook: Adaptation of the Global Financial ArchitectureBibliography

CBDC as New Element of the Global Financial Architecture

Principles of the Global Financial Architecture

After each financial crisis, regulators express their opinion that international rules should be better coordinated and/or harmonized to avoid spillover or contagion effects. Due to their nature, both data and financial assets flow around the globe and have a cross-border nature. Therefore, the voices advocating for a global financial architecture (GFA)[1] became stronger during the last decades and many harmonized regulations have been implemented in the course of this time.

According to the prevailing academic research, a new GFA should encompass the following substantive topics:[2]

Viable legal infrastructure: Clear and defined rights and adequate regulations, i.e., a stable normative framework, lead to an appropriate governance structure.Coherence: Uncoordinated piecemeal regulations will not establish a coherent institutional and legal framework;Sequencing: The adaptation of a national system to international standards must be done in several steps allowing the market participants to get accustomed to new rules over time;Evaluation: There is a need for appropriate and ongoing monitoring of a changing regulatory framework;Interconnection: Legal reforms in different segments of the financial markets should be executed in an interrelated way;Standards: The consistency of the accounting and other relevant standards is an important pre-condition for a sound legal framework;Transparency: Better informed markets are likely to make better decisions;Avoidance of corruption, money laundering and other criminal activities: Undesired behavior undermines public confidence.

Cryptocurrencies in general and Central Bank Digital Currencies (CBDC) in particular which have been developed during the last ten years cause new challenges for the abovementioned substantive topics of a new GFA; the following article attempts to shed light on the specific problems imposed by the decentralized infrastructure of digital currencies on the centralized global architecture in financial markets from an information technology[3] and model-theoretical perspective.[4]

CBDC as Driver of New Regulatory Complexities

Private cryptocurrencies (e.g. Bitcoin, Ethereum, Stablecoins like DAI, Liquity)[5] and the upcoming CBDC lead to greater currency competition, however, equally to increased regulatory complexities.[6] Since cryptocurrencies are a part of the GFA and also require a global financial network infrastructure, interoperability becomes a major issue.[7] Whereas private cryptocurrencies are designed for global use on decentralized infrastructures, CBDC, issued by a (national) Central Bank (or a regional Central Bank as in case of the European Central Bank), have a state-oriented character by definition.[8]

In addition, and apart from aspects of financial stability, CBDC represent a liability of a Central Bank.[9] Furthermore, there are important legal issues that are not decisive for private cryptocurrencies, such as the qualification of legal tender, but are to be tackled in the context of CBDC.[10] These issues will not be discussed hereinafter, rather, the question as to how CBDC can be integrated into and form a part of the GFA will be the main topic, both from a theoretical and a practical perspective.

CBDC can be designed in different technological ways; insofar, at least in principle, the existing GFA does not provide for any specific option or model. The following differentiations for the issuance of CBDC must be considered:

(i) Technological basis of CBDC issuance: Two principal designs are possible, namely

An account-based CBDC, i.e., an account is established at the issuing bank for the public for (in principle) daily use; as follow-up question it must be decided whether the account is interest-bearing or not.[11]A token-based CBDC, i.e., “digital cash” is issued by the Central Bank, being the more “modern” option since a (contractual) relation to the account-provider is not necessary and, therefore, an improvement in payment systems becomes possible[12] and anonymity can be secured.[13]

(ii) Addressees of CBDC: The Central Bank has to decide whether “only” wholesale CBDC should be issued to participants such as clearing banks and public bodies (as presently foreseen in Switzerland)[14] or whether retail accounts for day-to-day use are to be developed (causing constitutional challenges in Switzerland).[15]

(iii) Existence of intermediaries: Finally, the CBDC can be single-tiered, i.e., the Central Bank directly issues CBDC to the public and operates all aspects of the system, or two-tiered, i.e., the Central Bank relies on intermediaries (commercial banks) for the issuance of CBDC and for the interactions with the customers.[16]

A further complexity level concerns the programmability of payments and money which can be done with three possible approaches, namely (i) integrating the functionality into the fundamental ledger, (ii) providing the capability through an additional “module”, or (iii) “outsourcing” it to payment service providers. Thereby, the following trilemma occurs:[17]

Model 1 can achieve programmability and high throughput to the detriment of security, in model 2 throughput is jeoparded and model 3 abandons programmability.

Technical Design of CBDC Networks

Network Decentralization

Traditional payment systems, expressed in national or regional currencies, do have a technically centralized structure and the settlement between different currencies is done by central institutions such as clearing banks or SWIFT. In contrast, CBDC, technically issued on the distributed ledger technology (DLT) infrastructure, are based on a decentralized infrastructure having a large number of so-called nodes which are likely to increase over time.[18]

The DLT architectures consist of the mentioned technical nodes which are interconnected to form a network; the nodes are run independently and represent the participants on the platform. In other words, the nodes that include interests, values, perceptions, knowledge, and legal sources interact with each other and form those ties that shape the network structure.[19]

According to economic theory, centralized networks are arguably the most efficient structures; centralization leads to positive network externalities.[20] Nevertheless, it cannot be overlooked that centralized networks are also vulnerable if the hub fails (for example in case of a heavy cyberattack).[21] Therefore, decentralized networks based on the DLT infrastructure do have some operative advantages; however, the decentralized access structure also offers potential access points for any kind of cyberattack.

For technical reasons the CBDC network is suitable to be divided into clusters (sub-networks). The different types of networks can be expressed in the form of the following charts:[22]

The most appropriate form would likely be a decentralized network; this structure, even if less efficient, has the advantage of enhanced resilience since the network does not depend on a single network or node.[23] But theoretically, the form of the distributed network would also be an option even if it is less probable that such a network will be implemented. At any rate, however, the network structure will be flat or multipolar.[24]

For the time being, it appears to be uncertain how exactly the different decentralized CBDC networks will be linked to each other on a cross-border scale, i.e., how the interoperability is to be globally established.[25] This aspect depends on the number of nodes, on how often those nodes interact, and on the network structure (i.e., the network “density”); in addition, clusters (subgroups) may not necessarily be based on a model of hubs if interoperability can be guaranteed otherwise.[26]

Network Forms

Irrespective of the degree of structural decentralization, networks can be designed in two different forms, namely in the form of networks-as-actors or in the form of networks-as-structures.[27] In the first case, international governance among key actors is given, in the second case, the behavior of the actors remains uncoordinated. The CBDC networks are likely to have elements of both forms even if a higher proximity to the networks-as-structures is probable[28] since a coordination as foreseen in the Bretton Woods Agreements is unlikely occurring.

Theoretical Approach: Competition or Coordination?

Introduction

After the description of the CBDC networks’ technical design, the following section analyzes the possible regulatory approaches from a model-theoretical point of view. Traditionally, academics distinguish between two models, namely the concept of regulatory competition and the concept of regulatory coordination.[29]

Regulatory competition, partly also called “concept of conflict”, follows the assumption that it has advantages to implement a preferable regulatory environment for the national businesses. Subsequently, private enterprises evaluate which regulatory regime would offer the best commercial environment.[30] The regulatory competition model is premised on regulatory arbitrage and on the effective discovering of the different features of regulatory regimes; this approach can ease the informational asymmetry and improve the quality of regulatory interventions.[31] According to a general academic assessment, different forms of regulatory competition and possible typologies can be designed from manifold perspectives (for example competition among jurisdictions or among legal actors).

In contrast, the approach of regulatory coordination attempts to create internationally harmonized norms; the coordination model, partly also called “concept of cooperation”, is based on the standardization principle, i.e., coordination avoids the risk that similar activities are treated differently due to geo­graphical borders.[32] As a consequence, the concept of coordination leads to substantive convergence. Coordination as the alternative approach can occur between standard-setters or standardization organizations attempting to introduce harmonized provisions in certain markets.[33] Coordination by harmonized norms has the potential to restrict regulatory innovations but leads to a standardization of rules and, thereby, facilitates market behavior.

Chances and Risks of Regulatory Competition

Regulatory competition (or the model of “conflict”) between CBDC standards can lead to incompatibility of different technical standards, the uncoordinated networks-as-structure form might give rise to potential conflicts due to lack of interoperability.[34] At least to a certain extent, the implementation of “genuine standards” for example related to smart contracts and algorithms would facilitate cross-border transactions in different CBDC.[35] Divergence of standards causes conflicts, particularly in respect of cross-border interoperability; only the interconnection between national CBDC systems, ideally with common or homogenous standards, increases the interoperability and improves network efficiency.