[CMC Playbook] Stanley Yong foresees that the widening of CBDC production usage in 2023 will lead to more contentious and open debate about the proper scope and limits of a CBDC. Let's dive into his thesis on CDBC development in 2023. 🔎
The world in 2023 begins with several macroeconomic themes that we believe will play a role in reshaping the focus of some CBDC projects. Let us examine some of the major thematic reasons for a CBDC that have lost their urgency and perhaps relevance.
Disinflation is now a distant memory for Central Bankers that have to deal with long dormant inflation. Eurozone inflation reported in October 2022 stands at an annualised 10.7% based on Eurostat’s flash estimate. The CBDC discourse has shifted as well, with arguments for a CBDC leaning towards how CBDCs would in principle allow for different interest rates for different balances, which would aid in combating inflation. This of course conflates the CBDC with a technical implementation.
Third, the collapse of FTX in November awakened the public to the need for self custody in holding cryptocurrency. Consequently we anticipate that 2023 will bring a reexamination of key assumptions being made by Central Banks about the advisability of the two tier intermediated distribution model for CBDCs. Single tier direct distribution models and hybrid models for distribution are likelier than ever before to become part of operating CBDC designs.
In 2023, more Central Banks will therefore be willing to consider directly holding accounts for citizens on their books. This will need to be supported by the introduction of new and improved accounting systems and some resolution to important policy questions about the need for KYC on accounts and transactions.
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