IDEAS home Printed from https://ideas.repec.org/p/ecb/ecbwps/20253022.html
   My bibliography  Save this paper

Digital money and finance: a critical review of terminology

Author

Listed:
  • Bindseil, Ulrich
  • Coste, Charles-Enguerrand
  • Pantelopoulos, George

Abstract

The digitalisation of payments has accelerated over the last decades with the internet and ever faster and cheaper computing. Now, many believe that decentralised finance (“DeFi”) offers fundamentally new possibilities for trading, payments and settlement. Moreover, for a few years central banks have launched work on what has been called retail and wholesale central bank digital currencies (“CBDC”). Concurrent to the rise of innovative technologies has been the advent of new terminology, which is widely used, but which often seems to be biased, confusing, or is used inconsistently. By providing an etymology of key concepts and reviewing terminology and definitions, this paper also provides a new approach to clarifying the essence of new technologies in the field of payments to facilitate ongoing discussions about their eventual merits and use cases. JEL Classification: B26, E42

Suggested Citation

  • Bindseil, Ulrich & Coste, Charles-Enguerrand & Pantelopoulos, George, 2025. "Digital money and finance: a critical review of terminology," Working Paper Series 3022, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20253022
    Note: 327704
    as

    Download full text from publisher

    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp3022~67ea842a2a.en.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Fabian Schär, 2021. "Decentralized Finance: On Blockchain- and Smart Contract-Based Financial Markets," Review, Federal Reserve Bank of St. Louis, vol. 103(2), pages 153-174, April.
    2. Alexander Lee, 2021. "What is Programmable Money?," FEDS Notes 2021-06-23-1, Board of Governors of the Federal Reserve System (U.S.).
    3. Matthew Liu & Nolan Ly & Kurtis Orr & Amber Seira & Zach Vida & Cy Watsky & Lawrence Wu, 2024. "Tokenized Assets on Public Blockchains: How Transparent is the Blockchain?," FEDS Notes 2024-04-03, Board of Governors of the Federal Reserve System (U.S.).
    4. Iwamura, Mitsuru & Kitamura, Yukinobu & 北村, 行伸 & Matsumoto, Tsutomu & Saito, Kenji, 2019. "Can We Stabilize the Price of a Cryptocurrency?: Understanding the Design of Bitcoin and Its Potential to Compete with Central Bank Money," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 60(1), pages 41-60, June.
    5. Xavier Lavayssière & Nicolas Zhang, 2024. "Programmability in Payment and Settlement," IMF Working Papers 2024/177, International Monetary Fund.
    6. Morten Linnemann Bech & Rodney Garratt, 2017. "Central bank cryptocurrencies," BIS Quarterly Review, Bank for International Settlements, September.
    7. Naudts, Ellen, 2023. "The future of DAOs in finance - in need of legal status," Occasional Paper Series 331, European Central Bank.
    8. World Bank, 2021. "Central Bank Digital Currency," World Bank Publications - Reports 36766, The World Bank Group.
    9. Grym, Aleksi, 2018. "The great illusion of digital currencies," BoF Economics Review 1/2018, Bank of Finland.
    10. Masashi Hojo & Junichiro Hatogai, 2022. "Realizing Programmability in Payment and Settlement Systems," Bank of Japan Review Series 22-E-8, Bank of Japan.
    11. Barrdear, John & Kumhof, Michael, 2016. "The macroeconomics of central bank issued digital currencies," Bank of England working papers 605, Bank of England.
    12. Ross P Buckley & Anton N Didenko & Mia Trzecinski, 2023. "Blockchain and its Applications: A Conceptual Legal Primer," Journal of International Economic Law, Oxford University Press, vol. 26(2), pages 363-383.
    13. Rodney Garratt & Cyril Monnet, 2023. "An impossibility theorem on truth-telling in fully decentralised systems," BIS Working Papers 1117, Bank for International Settlements.
    14. Grimmelmann, James & Library, Cornell, 2019. "All Smart Contracts Are Ambiguous," LawArXiv v37zd, Center for Open Science.
    15. Bindseil, Ulrich & Senner, Richard, 2024. "Macroeconomic modelling of CBDC: a critical review," Working Paper Series 2978, European Central Bank.
    16. Alistair Milne, 2024. "Argument by False Analogy: The Mistaken Classification of Bitcoin as Token Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 56(8), pages 2199-2222, December.
    17. Ruttenberg, Wiebe & Pinna, Andrea, 2016. "Distributed ledger technologies in securities post-trading - Revolution or evolution?," Occasional Paper Series 172, European Central Bank.
    18. World Bank, 2021. "Central Bank Digital Currency," World Bank Publications - Reports 36765, The World Bank Group.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lim, King Yoong & Liu, Chunping & Zhang, Shuonan, 2024. "Optimal central banking policies: Envisioning the post-digital yuan economy with loan prime rate-setting," Emerging Markets Review, Elsevier, vol. 59(C).
    2. Dionysopoulos, Lambis & Marra, Miriam & Urquhart, Andrew, 2024. "Central bank digital currencies: A critical review," International Review of Financial Analysis, Elsevier, vol. 91(C).
    3. Paolo Fegatelli, 2019. "Central bank digital currencies: The case of universal central bank reserves," BCL working papers 130, Central Bank of Luxembourg.
    4. Dirk Niepelt, 2020. "Reserves for All? Central Bank Digital Currency, Deposits, and Their (Non)-Equivalence," International Journal of Central Banking, International Journal of Central Banking, vol. 16(3), pages 211-238, June.
    5. Davoodalhosseini, Seyed Mohammadreza, 2022. "Central bank digital currency and monetary policy," Journal of Economic Dynamics and Control, Elsevier, vol. 142(C).
    6. Alexandra Mitschke, 2021. "Central Bank Digital Currencies and Monetary Policy Effectiveness in the Euro Area," Working Papers Dissertations 74, Paderborn University, Faculty of Business Administration and Economics.
    7. Helder Miguel Correia Virtuoso Sebastião & Paulo José Osório Rupino Da Cunha & Pedro Manuel Cortesão Godinho, 2021. "Cryptocurrencies and blockchain. Overview and future perspectives," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 21(3), pages 305-342.
    8. Makoto Saito, 2021. "Central Bank Cryptocurrencies in a Competitive Equilibrium Environment: Can Strong Money Demand Survive in the Digital Age?," Advances in Japanese Business and Economics, in: Strong Money Demand in Financing War and Peace, pages 161-189, Springer.
    9. Hossein Nabilou, 2020. "Testing the waters of the Rubicon: the European Central Bank and central bank digital currencies," Journal of Banking Regulation, Palgrave Macmillan, vol. 21(4), pages 299-314, December.
    10. Theodore Pelagidis & Eleftheria Kostika, 2022. "Investigating the role of central banks in the interconnection between financial markets and cryptoassets," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(3), pages 481-507, September.
    11. Carlo Gola & Andrea Caponera, 2019. "Policy issues on crypto-assets," LIUC Papers in Economics 2019-7, Cattaneo University (LIUC).
    12. Rehman, Mubeen Abdur & Irfan, Muhammad & Naeem, Muhammad Abubakr & Lucey, Brian M. & Karim, Sitara, 2023. "Macro-financial implications of central bank digital currencies," Research in International Business and Finance, Elsevier, vol. 64(C).
    13. Sigitas Siaudinis, 2019. "Digital Currencies and Central Banking: A Sense of Déjà Vu," Bank of Lithuania Occasional Paper Series 26, Bank of Lithuania.
    14. Paulo Rupino Cunha & Paulo Melo & Helder Sebastião, 2021. "From Bitcoin to Central Bank Digital Currencies: Making Sense of the Digital Money Revolution," Future Internet, MDPI, vol. 13(7), pages 1-19, June.
    15. Romain Baeriswyl & Samuel Reynard & Alexandre Swoboda, 2024. "Retail CBDC purposes and risk transfers to the central bank," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 160(1), pages 1-15, December.
    16. Julián A. Parra & Carlos Arango & Joaquín Bernal & José E. Gómez & Javier Gómez & Carlos León & Clara Machado & Daniel Osorio & Daniel Rojas & Nicolás Suárez & Eduardo Yanquen, 2019. "Criptoactivos: análisis y revisión de literatura," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, issue 92, pages 1-37, November.
    17. Schilling, Linda & Fernández-Villaverde, Jesús & Uhlig, Harald, 2024. "Central bank digital currency: When price and bank stability collide," Journal of Monetary Economics, Elsevier, vol. 145(C).
    18. Louis Abraham & Dominique Guégan, 2019. "The other side of the Coin: Risks of the Libra Blockchain," Working Papers 2019: 30, Department of Economics, University of Venice "Ca' Foscari".
    19. Agur, Itai & Ari, Anil & Dell’Ariccia, Giovanni, 2022. "Designing central bank digital currencies," Journal of Monetary Economics, Elsevier, vol. 125(C), pages 62-79.
    20. Arto Kovanen, 2019. "Competing With Bitcoin - Some Policy Considerations for Issuing Digitalized Legal Tenders," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(4), pages 1-16, July.

    More about this item

    Keywords

    CBDC; DeFi; digital assets; DLT; tokenization;
    All these keywords.

    JEL classification:

    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecb:ecbwps:20253022. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Official Publications (email available below). General contact details of provider: https://edirc.repec.org/data/emieude.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.