Volume 17 (2023)

Each volume of Journal of Payments Strategy & Systems consists of four 100-page issues, published both in print and online. Articles scheduled for Volume 17 are available to view on the 'Forthcoming content' page. 

The Articles published in Volume 17 include:

Volume 17 Number 1

Special Issue: Next steps for digital currencies

  • Editorial: 
    Gerard Hartsink, Editor, Journal of Payments Strategy & Systems
  • Practice papers
    Do we really need another dollar, euro, pound or yuan? How to create the right ecosystem for a successful central bank digital currency
    Michael Salmony, Chief Executive Officer, Payments Innovation Consulting

    This paper discusses how to translate regulators’ policy needs to align with the needs of other stakeholders in the payments ecosystem. While most of the recent activity (papers, pilots, etc) in the field of central bank digital currency (CBDC) has focused on the potential advantages for central banks and on the technology (ledgers, platforms, etc), a more appropriate starting point is to identify what problems CBDC is intended to solve, especially for the affected stakeholders. At the end of the evaluation, focus on technological solutions should commence only once business and policy goals have been identified. After a quick summary of the motivations for central banks, regulators, governments and policymakers, the paper examines the motivations for the other key stakeholders in the ecosystem — an aspect that has to date been insufficiently examined. The paper then comments on the challenges associated with driving consumer adoption of CBDC, Michael Salmony before discussing the microeconomic disincentives for CBDC adoption among commercial banks, alongside the macroeconomic necessity. The paper concludes with some thoughts on how to balance the conflicting interest of the many stakeholders and the lessons one can learn from other large-scale payment initiatives.
    Keywords: CBDC, future of cash, payment ecosystem, incentives for adoption, balancing interests, stakeholder considerations

  • Central bank digital currencies: An active role for commercial banks
    Olivier Denecker, Expert Partner — Global Payments, Arnaud d’Estienne, Consultant, Pierre-Matthieu Gompertz, Former Associate Partner and Elia Sasia, Partner, McKinsey & Company

    With most central banks now exploring central bank digital currencies (CBDCs), commercial banks should be looking to establish their role in this fast-changing landscape. Among the roughly 90 per cent of the world’s central banks pursuing CBDC projects, many, including those in the USA and South Africa, are at the exploratory phase. Others are already managing development projects (the European Union) and pilots (China). The various imperatives behind these initiatives are easy for private actors in these markets to overlook, which sometimes complicates private–public cooperation. However, digitally issued public money stands at the forefront of central bank innovation in the monetary space. This paper reviews why central banks need to explore digital currencies and what questions they should address. It also sheds light on what commercial banks need to consider as they anticipate their stance in the CBDC development process. For both parties, the final section outlines the hurdles to successful CBDC design and rollout.
    Keywords: CBDC, digital currency, central banks, commercial bank cooperation, cash 2.0

  • Central bank digital currency challenges: The case of Greece
    Veni Arakelian, Senior Economist, Piraeus Bank

    As a result of demand for faster, less expensive payments and profound transformation within the payments system, central banks and nonbank entities are vying for a greater role in facilitating payments. In this respect, there is clear evidence that central bank digital currency will play a crucial role. This paper examines select characteristics of central bank digital currency through the lens of the Greek experience.
    Keywords: central banking, cross-border payments, digital payments, financial inclusion, FinTech, offline payments, security

  • Using central bank digital currencies across borders: Lessons from practical experiments
    Morten Bech, Head, Innovation Hub Swiss Centre, Codruta Boar, Adviser, Innovation Hub and Daniel Eidan, Adviser, Innovation Hub, Bank for International Settlements, Philipp Haene Adviser, Swiss National Bank, Henry Holden, Adviser, Innovation Hub, Bank for International Settlements and Wee Kee Toh, Executive Director, J.P. Morgan

    Central bank digital currencies (CBDCs) could help to deliver better cross-border payments. With projects InthanonLionRock2, Jura, Dunbar and mBridge, the BIS Innovation Hub has been leading practical experiments to show how CBDCs could make cross-border payments faster, cheaper and more transparent. This paper looks at similarities and differences across these four cross-border CBDC experiments with a view to setting out the insights and lessons learned. These experiments demonstrate that platforms with two or more CBDCs are technically feasible and could lower costs, make settlement faster and increase operational transparency. Nevertheless, policy, legal, governance and advanced feasibility questions remain. Work will continue with future phases of the experimentation.
    Keywords: cross-border payments, CBDC, DLT, central banks, innovation, experiments

  • China’s Digital Currency Electronic Payment: A ‘negotiated currency’ perspective
    Lisha Wang, PhD Candidate, The Chinese University of Hong Kong

    Around the world, interest in central bank digital currency (CBDC) is on the rise, and China’s digital currency electronic payment (DCEP) network is currently leading the way. This paper argues that despite its primarily domestic focus, DCEP has potential implications for the setting of standards for cross-border transactions in CBDC. Furthermore, the interoperability of Chinese private payment systems combined with the appeal of DCEP among countries looking to circumvent US sanctions could induce more countries to adopt it, thus improving the renminbi’s ‘negotiated’ status in the long run.
    Keywords: CBDC, DCEP, RMB internationalisation, cross-border payment

  • Wholesale central bank digital currency vs traditional real-time gross settlement: Benefits beyond a new acronym?
    Harry Leinonen, PSS-Consultancy, ESPOO

    Central banks need to modernise their wholesale payment services. This is not to say they must choose between modernising their real-time gross settlement systems or building a new wholesale central bank digital currency system. Rather, as this paper will argue, they must develop a common, standardised hybrid platform for the global financial (wholesale) markets. Indeed, central banks need to provide interoperable cross-border payment services by accepting foreign participants and coordinating their short-term liquidity instruments. This paper argues that if central banks want to serve future wholesale markets, they will need to provide 24/7/365 services with cross-border finality for simple fund transfers, but also for delivery-versus-payment and payment-versus-payment settlements at the transaction level. The paper will discuss how interoperability is a key issue, and requires completely common message and communication standards, but especially common identification and security standards in which distributed ledger technology and transaction-chaining are important elements. Wholesale systems must be highly resilient. As this paper shows, cooperation between central banks is essential if they are to deliver cross-border wholesale payment services for the global financial markets of the future.
    Keywords: wholesale payments, cross-border large-value payments, wCBDC, RTGS developments

  • Identifying and authenticating the users of virtual currency via electronic attestation and the European Digital Identity Wallet
    Ignacio Alamillo-Domingo, Legal Counsel, Logalty Prueba por Interposición

    EU regulations mandate the use of customer identity verification and authentication measures to ensure virtual currencies are not used for money laundering activities or the financing of terrorism. This paper explores these obligations in the context of electronic attestation, the European Digital Identity Wallet and the proposed amendment to the eIDAS Regulation.
    Keywords: stablecoins, asset-referenced tokens, electronic money tokens, identification, strong customer authentication, European Digital Identity Wallet, electronic attestation of attributes, eIDAS

  • Designing digital currency wallets for broad adoption
    Becca Scollan, Principal Human Factors Engineer and Erika Darling, Principal Human Factors Engineer, The MITRE Corporation

    For most citizens, the primary touch point for central bank digital currency (CBDC) transactions would be a digital currency wallet. A CBDC wallet may have attributes in common with a cryptocurrency wallet and others in common with a mobile payment wallet. If a CBDC is built on distributed ledger technology with token-based access, it would have even more in common with a cryptocurrency wallet than a mobile payment wallet. The unbanked population is increasingly using cryptocurrency wallets and mobile payment wallets. To promote broad adoption of a CBDC among populations currently underserved by the financial industry, governments will first need a greater understanding of the barriers to adoption. This paper examines the user-facing issues pertaining to access and financial inclusion, usability, security, privacy and interoperability, and identifies 11 key user-centred issues relating to the use of CBDC wallets, along with recommendations to address these issues. By adopting these recommendations, a CBDC wallet would better meet the needs of populations underserved by the traditional financial system.
    Keywords: central bank digital currency, digital currency wallet, user experience