Central Bank Digital Currencies: An Old Tale with a New Chapter

Michael D. Bordo and William Roberds
Working Paper 2022-18
December 2022

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We consider the debut of a new monetary instrument, central bank digital currencies (CBDCs). Drawing on examples from monetary history, we argue that a successful monetary transformation must combine microeconomic efficiency with macroeconomic credibility. A paradoxical feature of these transformations is that success in the micro dimension can encourage macro failure. Overcoming this paradox may require politically uncomfortable compromises. We propose that such compromises will be necessary for the success of CBDCs.

JEL classification: E42, E58, N10

Key words: monetary systems, banknotes, central banks, digital currencies


This paper was prepared for a conference held in honor of Angela Redish at the University of British Columbia on October 14, 2022. The views expressed here are those of the authors and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors' responsibility.

Michael D. Bordo is with Rutgers University, the National Bureau of Economic Research, the Hoover Institution, and Stanford University. Please address questions regarding content to William Roberds, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree St. NE, Atlanta, GA 30309, william.roberds@atl.frb.org.

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