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The Positive Case for a CBDC

Author

Listed:
  • Andrew Usher
  • Edona Reshidi
  • Francisco Rivadeneyra
  • Scott Hendry

Abstract

In this paper we discuss the competition and innovation arguments for issuing a central bank digital currency (CBDC). A CBDC could be an effective competition policy tool for payments. On innovation, we argue that a CBDC could be necessary to support the vibrancy of the digital economy by helping solve market failures and fostering competition and innovation in new digital payments markets. Overall, competition and innovation are supporting arguments for issuing a CBDC.

Suggested Citation

  • Andrew Usher & Edona Reshidi & Francisco Rivadeneyra & Scott Hendry, 2021. "The Positive Case for a CBDC," Discussion Papers 2021-11, Bank of Canada.
    • Handle: RePEc:bca:bocadp:21-11
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    References listed on IDEAS

    as
    1. Raphael Auer & Philipp Haene & Henry Holden, 2021. "Multi-CBDC arrangements and the future of cross-border payments," BIS Papers, Bank for International Settlements, number 115.
    2. Christopher Henry & Kim Huynh & Angelika Welte, 2018. "2017 Methods-of-Payment Survey Report," Discussion Papers 18-17, Bank of Canada.
    3. Thomas Philippon, 2015. "Has the US Finance Industry Become Less Efficient? On the Theory and Measurement of Financial Intermediation," American Economic Review, American Economic Association, vol. 105(4), pages 1408-1438, April.
    4. Jonathan Chiu & Mohammad Davoodalhosseini & Janet Hua Jiang & Yu Zhu, 2019. "Bank Market Power and Central Bank Digital Currency: Theory and Quantitative Assessment," Staff Working Papers 19-20, Bank of Canada.
    5. Lukasz Pomorski & Francisco Rivadeneyra & Eric Wolfe, 2014. "The Canadian Dollar as a Reserve Currency," Bank of Canada Review, Bank of Canada, vol. 2014(Spring), pages 1-11.
    6. Charles M. Kahn & Francisco Rivadeneyra & Tsz-Nga Wong, 2018. "Should the Central Bank Issue E-money?," Staff Working Papers 18-58, Bank of Canada.
    7. Ben Fung & Scott Hendry & Warren E. Weber, 2017. "Canadian Bank Notes and Dominion Notes: Lessons for Digital Currencies," Staff Working Papers 17-5, Bank of Canada.
    8. Alejandro García & Bena Lands & Xuezhi Liu & Joshua Slive, 2020. "The potential effect of a central bank digital currency on deposit funding in Canada," Staff Analytical Notes 2020-15, Bank of Canada.
    9. Seyed Mohammadreza Davoodalhosseini & Francisco Rivadeneyra, 2020. "A Policy Framework for E-Money," Canadian Public Policy, University of Toronto Press, vol. 46(1), pages 94-106, March.
    10. Marie-Hélène Felt & Fumiko Hayashi & Joanna Stavins & Angelika Welte, 2021. "Distributional Effects of Payment Card Pricing and Merchant Cost Pass-through in Canada and the United States," Staff Working Papers 21-8, Bank of Canada.
    11. Kim Huynh & Jozsef Molnar & Oleksandr Shcherbakov & Qinghui Yu, 2020. "Demand for Payment Services and Consumer Welfare: The Introduction of a Central Bank Digital Currency," Staff Working Papers 20-7, Bank of Canada.
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    Citations

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    Cited by:

    1. Joann Jasiak & Peter MacKenzie & Purevdorj Tuvaandorj, 2023. "Digital Divide: Empirical Study of CIUS 2020," Papers 2301.07855, arXiv.org, revised Oct 2024.
    2. Van Roosebeke, Bert & Defina, Ryan, 2021. "Central Bank Digital Currencies: The Motivation," MPRA Paper 111006, University Library of Munich, Germany.
    3. Constanza Martínez-Ventura & Julián A. Parra-Polania & Tatiana Mora-Arbeláez & Angélica Lizarazo-Cuéllar, 2023. "Expected Macroeconomic Effects of Issuing a Retail CBDC," Borradores de Economia 1247, Banco de la Republica de Colombia.
    4. Marcelo A. T. Aragão, 2021. "A Few Things You Wanted to Know about the Economics of CBDCs, but were Afraid to Model: a survey of what we can learn from who has done," Working Papers Series 554, Central Bank of Brazil, Research Department.

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    More about this item

    Keywords

    Digital currencies and fintech; Financial institutions; Financial stability;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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