Kiffmeister’s FinTech Daily Digest (07/12/2020)

CBDC and the New World of Money and Payment Systems
According to this paper, when introducing sovereign digital currencies (SDCs), the key motivations and design choice parameters are largely determined by an efficiency vs safety paradigm:

  • Where increasing efficiency is the main motive, Hybrid SDC models, involving partnerships between the public and private sectors, are most likely to emerge, in which monetary arrangements will remain dominated by central banks (particularly major economy central banks) with the private sector involved in various payments configurations. 
  • Where financial inclusion is the paramount policy goal, a Centralized SDC model, characterized by direct access to the central bank, may be initially adopted (and then be replaced by the hybrid SDC model over time). 
  • A Decentralized SDC is probably a non-starter because of governance concerns. 


  • I like the term “sovereign digital currency” (SDC) as opposed to the stretching of the term “central bank digital currency” (CBDC) if efforts like the Marshall Island SOV are to be included. However, given that the paper focuses almost exclusively on central bank-issued currency, I wonder if the introduction of new terminology is really necessary.
  • I seriously doubt that any central banks have considered, or are considering, the “centralized” SDC, although I think the paper suffers from a mis-classification problem, because it designates the Uruguay pilot as “centralized” whereas the user-facing account-management was all outsourced to the private sector. 

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