Payments and the central bank of the future
As central banks play a key role in payment systems, both the declining use of cash and related private sector developments may require them to step up and take a more active role (Carstens 2020). If a central bank were to issue a CBDC, it might opt to – but would not have to – operate any of the communication and record-keeping infrastructure. However, record-keeping, integrity protection and establishment of the necessary level of consistency can also be delegated to the private sector, which might either be allowed to use proprietary technology or be required to run open protocols specified by a standardisation body.
The need for technical supervision emerges as soon as the central bank is shielded from some retail transactions, which a fraudulent or technically compromised PSP could use to appropriate customer funds. Maximum supervision is required when the central bank has the conceivable minimum information set. Payment supervision must happen at a high frequency – perhaps even in real time. It must put aspects like data consistency, cyber security and privacy at centre stage.ADVERTISEMENT
All this pinpoints a novel trade-off for central banks in the digital era: they can operate either complex technical infrastructures or complex supervisory regimes. There are many ways to do so, but all will require the central bank to develop substantial technological expertise.