Tokenizing Central Bank Money on Public Blockchains (SSRN)
Ulrich Bindseil and Benjamin Duve posted a paper that explores the option of issuing central bank digital currency (CBDC) on public blockchains. The paper first reviews the main reservations, which include technical fragmentation, governance and operational risks, financial-stability concerns, and illicit-use and reputational risks. It then assesses how modern blockchain features may mitigate risks and evaluates the public policy objectives such issuance could advance. For example, central banks can mitigate chain-selection, operational, and illicit-use risks through formal admission criteria and strict issuer-controlled interoperability, plus embedded compliance architecture, and issuer-level control over minting, redemption, and freezing—paralleling existing stablecoin practice. Public rails would be markedly cheaper than proprietary infrastructure, while advancing monetary sovereignty, seigniorage, and financial stability. The authors conclude these risks are manageable, proposing licensed, fully backed licensed stablecoins as a transitional alternative. [SSRN]
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