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 Electronic Cash, Universal Reserves, or Sovereign Account Money?

To explore this issue we shall connect the three perspectives on money with the definition of CBDC. As we have seen, CBDC is defined by integrating the three features of existing money: electronic, universally accessible, and central bank issued. Using the logic of the Venn diagram, we can also define CBDC in terms of each of the existing forms of money. These would be definitions that think of CBDC as an elaborated version of cash, bank money, or central bank money:

1) CBDC is an electronic version of cash.
2) CBDC is a universally accessible version of central bank reserve money.
3) CBDC is a central bank-issued version of commercial bank account money.

From a purely logical perspective, this may seem to be nothing but a play with words as there is no technical difference between these three definitions. They do not even add anything to the initial definition of CBDC. In the terminology of Kant, we would refer to them as analytical propositions that do nothing but recombine the inherent elements of the initial definitions of the different kinds of money. The significance of this play with words, however, emerges, when we move from the technical and logical and into the domain of politics. While each of the three definitions amount to the same basic features, they signify three different ways of thinking about CBDC about existing forms of money. It makes a crucial difference in the political discussion about design and implementation, whether we think of CBDC as an elaborate version of cash, an elaborate version of central bank reserve money, or an elaborate version of commercial bank account money.

To think analytically about this issue, we shall make three propositions that guide the discussion of the subsequent sections of the paper:


- We propose to sum up the three definitions of CBDC in terms of three names that signify a particular way of thinking about money:

 electronic cash, universal reserves, or sovereign account money.

- We propose that the particular ways of thinking about money signified by the three names correspond to the three perspectives on money laid out in the previous section. This means that thinking about money from the money user perspective leads you to think about CBDC as electronic cash, thinking of money from the money manager perspective leads you to think about CBDC as universal reserves, and thinking about CBDC from the money maker perspective leads you to think about CBDC as sovereign account money.

- We also propose that each of the three names corresponding to a particular perspective on money carries a predisposition towards a particular design of CBDC. Thinking about CBDC as electronic cash carries a predisposition towards a model where CBDC co-exists with cash and bank money. Thinking about CBDC as universal reserves carries a predisposition towards a model where cash is abolished and CBDC co-exists with bank money. Thinking about CBDC as sovereign account money branches into two models depending on whether it takes the central bank or the citizen as its vantage point. The former vantage point carries a predisposition toward a model where both cash and bank money is abolished and CBDC is the only form of money in circulation. The latter vantage point carries a predisposition towards a model where bank money is abolished and CBDC co-exists with cash.
These propositions are of course speculative deductions. Their purpose is to serve as the basis for the construction of three ideal-typical scenarios about the design and implementation of CBDC. The three ideal-typical scenarios are summarized in the table (Ideal typical scenarios of CBDC).

Ideal typical scenarios of CBDC

we shall be looking into each of these scenarios to unfold,how a particular view on money tends to point to a particular design model for CBDC. Furthermore, each of the design models carries with them a set of monetary policy implications and even contradictions.

As we explore the different scenarios, we shall also be unfolding these implications and contradictions. The primary design questions regard the status of cash and bank money that was listed previously: 

Should CBDC circulate together with cash or bank money, together with both, or together with none of them? We shall also be addressing two other questions, which are pertinent to the design, implementation, and subsequent management of CBDC. This first question concerns the introduction of new CBDC into the economy and the management of the total supply:

- Which agents should have access to buy CBDC directly from the central bank and in exchange for which kinds of assets?
The second question concerns the use of CBDC as a monetary policy tool:

- Should CBDC carry interest and should this interest be allowed to go into negative?

As we are going to see, these questions are not entirely open as they are partially determined by the particular design model, which is chosen.