Electronic central bank cash: To be or not to be?

Abstract

Increasing digitisation, developments in electronic payment technology — especially cryptocurrencies — and the declining use of paper cash are prompting discussions regarding the possibility of central banks launching electronic cash (e-cash). This paper discusses the expectations that e-cash would need to meet, from a user perspective, and argues that e-cash would need to have more in common with modern account-based electronic and mobile account payments than with traditional cash. Were central banks to launch e-cash, they would be in direct competition with private payment services. A successful e-cash service would therefore require a competitive edge over private electronic payment services. This would create a risk of market distortion for both payments and deposit services. Regulatory issues such as knowyour- customer requirements and account/transaction liabilities would play a major role in e-cash services. Central bank e-cash would have to fulfil the basic payment instrument requirements of a sufficiently large segment of the payments market.