Unstable Coins: The Early History of Central Bank Analog Currencies

Recently, there has been much discussion as to whether central bank digital currencies (CBDCs) should be introduced, and if so, how they should be designed. This article offers a historical perspective on this discussion, with a survey of early public bank (proto-central bank) "analog currencies"—circulating banknotes. Public banknotes were an experimental product when they were first issued in sixteenth-century Naples, but by the late nineteenth century, such notes could be found in most European countries. In between came all sorts of implementation difficulties: egregious insider fraud, a real estate finance bubble, hyperinflation, rampant counterfeiting, and complete institutional collapse. Despite these many misfires, central bank–issued notes eventually became the default form of payment in virtually every country worldwide.