Towards immediacy and continuity in money and finance? (SSRN)
The European Central Bank’s (ECB’s) Ulrich Bindseil posted a paper he wrote with Omid Malekan on time structure phenomena in finance, money, payments and settlement and how they are affected by progress in information and communications technology (ICT). While technology is a key driver of the evolution towards immediacy and continuity, they note that in some instruments, settlement lags and discontinuities have remained unchanged for long periods of time despite significant ICT progress, and they identify cases in which even ideal ICT would not seem to imply immediacy and continuity. For example, two-sided transactions in which not only money, but also another often less liquid asset has to be settled, may be resistant to shorter settlement cycles until the role of intermediaries and number of layers are reduced, possibly via decentralized finance (DeFi). [Read more on SSRN]
The impact of CBDC on central bank profitability, risk-taking and capital (ECB)
The ECB published a paper (co-written by Ulrich Bindseil) that uses scenario analyses to illustrate the key drivers of the impact of central bank digital currency (CBDC) on central bank profitability. It finds that CBDC will have broadly the same balance sheet and profit implications as the issuance of banknotes. It shows that pure exchange of banknotes for CBDC has no further implications on central banks’ balance sheets, and thus their financial risks, profits and capital. This is different, however, for other exchanges of monetary liabilities, such as commercial bank deposits, which increase the amount of unremunerated central bank monetary liabilities and may require the creation of additional reserves for banks via the corresponding additional central bank assets. The last two points would could give rise to higher central bank income when interest rates are positive. However, these risk implications can be managed via well-established frameworks and likely be mitigated by measures to limit CBDC take-up. [Read more at the ECB]
A method for uncovering tokenization archetypes and their effects (SSRN)
Anisa Plepi and Peter Schendner posted a paper that proposes a framework for aggregating and categorizing viewpoints on fundamental issues concerning tokenization, and assessing the causal effects of tokenization on market outcomes, using bonds as an example. The framework starts with a taxonomy of bond tokenization use cases according to the tokenization model, which is fed into a causal model to assess how would the outcomes, characterizing its lifecycle processes change if a bond had been tokenized instead of using the traditional infrastructure. Or alternatively, how would the outcomes of interest change if a bond had been exchanged in the traditional infrastructure instead of being tokenized? The paper then proposes an outcomes matrix to estimate the effects of tokenization on particular outcomes for which there are 25 metrics. The framework then conceptualizes the Swiss National Bank (SNB) Project Helvetia tokenization approach and evaluate its effects on efficiency and liquidity. [Read more on SSRN]
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Upcoming Speaking Engagements:
- Digital Euro Conference 2025, Frankfurt, March 27, 2025. The DEC25 conference will explore the future of money with a focus on CBDCs, stablecoins, tokenized deposits, and the intersection of AI and digital ID. When you register, get 20% off the regular ticket price by using the Kiffmeister20 code! [Find out more and register here]
And just a reminder that I produce a monthly digest of central bank digital currency (CBDC) developments exclusively for the official sector. So (only) if you work at a central bank, ministry of finance or international financial institution (e.g., the BIS, IMF, OECD, World Bank) and who would like to receive it by email on the first business day of every month, please DM me on LinkedIn or email me at john@kiffmeister.com.
