Basil, Vollenweider, the digital franc - Our money of the future, MSc BA, Fall 2023, BFH
Details
- Author: Basil Vollenweider
- Title: Digital franc - our money of the future
- Supervisor: Prof. Dr. Jörg Osterrieder
- Degree: Master of Science
- University: Bern University of Applied Sciences
- Year: 2023
- Status: Working Paper
Summary
The aim of the research paper is to determine the possible effects, opportunities, and risks for monetary policy, society, companies, and financial market participants in connection with a CBDC in Switzerland. Furthermore, this work considers a potential shift in power relevant to this context.
Abstract
TThe concept of the retail CBDC is based on the issuance of a digital central bank currency that can be used by the general population in retail applications. This paper aims to examine the advantages, disadvantages, opportunities, and risks of the CBDC concept, as presented in previous literature, within the context of Switzerland
To identify the advantages and disadvantages from the literature, the paper applies the methodology of systematic literature analysis and uses the Swisscovery, JSTOR, Science Direct, and Springer Verlag databases. After cleaning the obtained results to produce a final selection, this study then analysed individual papers and categorised the relevant advantages and disadvantages.
This study has shown that there are various advantages and disadvantages of CBDC both in general and in the context of Switzerland. The study has also shown that most of them are related to the design of a CBDC and can be partially avoided by a specific architecture. Further research has shown that the disadvantage of loss of monetary sovereignty and the advantage of financial stability in particular can have a major impact on Switzerland. Furthermore, this study examines how CBDC might relate to a potential shift in power. It should be noted that the establishment of a private alternative in Switzerland would transfer monetary policy decisions from the central bank to the issuers of private alternatives. This would then mean that monetary policy in concrete terms would be based on the interests of the private issuers. As a result, the economic development of the country would be significantly influenced. In addition, it should be noted that there may also be a power shift in connection with the banks. A direct system would lead to the disintermediation of banks, who would then be disempowered on the financial market. However, this danger is classified as relatively small. This is especially true given that the Swiss central bank would like to retain the current system based on the two-tier system central bank-to-commercial bank-to-private.