CBDC is “quantum value” money. Each token is denominated in a specific and unchanging face value. Mobile Money is account based money and is “continuous value”. Each account can be denominated in any value.
The challenge is in how to transfer a part of the money in my “wallet” to someone else… $152 is held (for one example) as … (1) $100, (2) $20, (1) $10, and (2) $1. I want to buy a bag of groceries for $72. I can’t do that with the bills I have, someone has to make change. If I rely on the payee to do it, they likely won’t have enough of the right notes to do it either. (Picture the clerk holding your $100 bill aloft and calling out, “Can anyone break a hundred?!”)
In CBDC systems we’ve studied, all change making must be done by a financial institution. That is, I must direct my institution to produce notes to cover the payment I want to make, while replacing the notes in my wallet with a different set of notes representing my remaining balance.
But in this case, there is no end-user value of holding a tokenized money note. It is much simpler and much easier to implement account based money.
So it seems the way to allow central bank money to collateralize inter-institution settlement is of high value; but trading CBDC between end users just adds friction and has no direct benefit… my account is still backed by central bank money, if the 100% reserve requirement of mobile money is denominated in central bank money (by holding bonds, e.g.).
It think this is the central unanswered question of value for end users.
There is also another issue with the inefficiency of settlement using large “stacks” of eNotes. In Myanmar, e.g., inter-bank settlement is actually done using stacks of bills! US$200,000 in Myanmar kyat is a stack of bills several feet high! All of those eNotes would have to change possession to complete a single bilateral settlement (or one leg of multilateral settlement). This is hugely inefficient.
Compare that to multilateral net settlement in account based money (including central bank money)… one transfer for each active participant (either a single credit or single debit).
This is the essential challenge with using CBDC in wholesale settlement arrangements.
I would love to discuss these two challenges further.
Many thanks for your excellent presentation!