Designing and Regulating Retail Digital Currencies

CIGI Policy Brief No. 168

September 13, 2021

Governments and multinational organizations are exploring the feasibility of developing “retail” digital currencies, sponsored by governmental central banks or privately issued, which consumers could use on a day-to-day basis as an alternative to cash. Central bank digital currencies could be either account-based or token-based. Privately issued digital currencies would likely be token-based. Private issuers are focusing on “stablecoins,” which are digital currencies backed by assets having intrinsic value. Retail digital currencies raise new regulatory issues in addition to those typically associated with money and payment systems. The most successful retail digital currencies are likely to be used not only domestically but also in cross-border transactions, which can be costly. They therefore should be designed, regulated and supervised to reduce these costs and, ideally, also to increase consumer accessibility — and thus to broaden financial inclusion.

About the Author

Steven L. Schwarcz is a CIGI senior fellow and the Stanley A. Star Distinguished Professor of Law and Business at Duke University. Steven is an expert on systemic risk and financial regulation, corporate governance of systemically important firms, cross-border resolution measures and sovereign debt restructuring.