Say Good Bye To Physical Cash and Welcome To Central Bank Digital Currency

Say Good Bye to Physical Cash and Welcome to Central Bank Digital Currency 
Dr. John Taskinsoy a
ABSTRACT
Over a decade has passed since a mysterious creator under the alias Satoshi Nakamoto (a pseudonym)
launched Bitcoin in January 2009, who designed it as a decentralized (permissionless) purely peer-
to-peer network of electronic cash that runs on blockchain using cryptography and distributed ledger
technology. Although money’s evolution into digital form (account-based and token-based) began
several decades ago, it became a reality with Bitcoin and accelerated with stablecoins which have
spurred central banks throughout the world to conduct theoretical and conceptual research into
CBDC which is considered to be one of the most significant innovations in decades. However, central
banks have serious concerns whether cryptocurrencies, stablecoins and central bank backed digital
currencies can or will co-exist alongside fiduciary (fiat) currencies. Even though paper money-based
payment systems still continue to play important roles, the digitalization of money as CBDCs could
potentially dethrone cash’s centuries-long reign in near future. Different central banks are moving at
substantially varied speeds; while China as a major economy is at the forefront of paper money’s
transition into digital form, the U.S. and the UK are proceeding rather cautiously; on that note,
Philadelphia Federal Reserve President Patrick Harker contends that the U.S. should rush to issue a
CBDC just because China is rolling out its digital yuan. The most dominant Fed and the Bank of
England argue that CBDCs should only be launched when benefits (i.e. reduced transaction cost,
better track of money movement, and tighter control of tax evasion and financial crime) outweigh
costs, in other words, a CBDC should be “minimally invasive”. Most central banks in advanced nations
and EMEs emphasize that CBDCs should replicate properties of the current two-tier monetary system
(wholesale and retail) which is based on physical cash and private intermediation, but they also
caution that CBDC research is in early stages with a wide variety of unanswered technological and
design challenges (i.e. central banks lack technological expertise) as well as potential risks such as
run on deposits, anonymity (data privacy), and elimination of private commercial bank (i.e. trusted
third party) intermediation involving deposits and loan generation, payments, and ATMs (the need
for ATMs and bank branches has decreased significantly since the outbreak of COVID-19).
Keywords: Central bank digital currency; CBDC; electronic cash; DLT; financial inclusion
JEL classification: E42, E51, E58, F31, G21, G28, L50, O32
 This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.
a Corresponding author email address: johntaskinsoy@gmail.com
Faculty of Economics & Business – Universiti Malaysia Sarawak (Unimas), 94300 Kota Samarahan, Sarawak, Malaysia.
1
1.0 Introduction
Money has been evolving for at least two millennia (circa 250 B.C.)1, but central banks2 - alchemist of
modern banking, only became part of this evolution in the 17th century3 (for a brief history, see Bordo,
2007; also see Bordo and Levin, 2017). Bordo (2007) asserts that “the U.S. Federal Reserve System
belonged to a later wave of central banks at the turn of the 20th century.” Similarly, the U.S. belongs
to a later wave of central bank digital currency (CBDC) adoption in the 21st century. Although central
banks around the world have only recently started to look into the concept of CBDCs, accelerated with
the COVID-19 pandemic), the founding research of electronic cash goes back at least to the early
1980s. The first wave of attempts began with Chaum’s “untraceable payments” (Chaum, 1982), but
applications like combating email spam, decentralized electronic cash, and minting digital coins via
solving double-spend problem never saw a widespread adoption till the birth of Bitcoin in 2009 as a
first successful cryptocurrency (Woodford, 2000; Camenisch et al., 2005; Okamoto & Ohta, 1992).4
Exchange (trade) dates back to prehistoric times ever since humans walked on Earth. Before the
invention of modern money, there was barter as a reciprocal exchange. Barter takes place in real time
between two individuals who are willing to exchange goods for other goods without using a monetary
medium such as silver, gold, or fiat money (e.g. O'Sullivan & Sheffrin, 2003; Cellarius, 2000; Chapman,
1980). While some economists including Smith (1776) and Dalton (1967) advocated that the inherent
flaws of primitive barter (i.e. inefficiency and negative reciprocity) led to the emergence of money,
anthropologists on the other hand contend that barter played a role in the advent of money (Graeber,
2001; Fournier, 2015).5 With the invention of money (coinage and paper), trade (i.e. bilateral or
multilateral) became a widespread practice and grew exponentially underpinned by specialization
and division of labor that fueled economic activity (see Samuelson, 1939; Smith, 2008). Evolution of
money continues as we speak, so far its arduous journey has gone through seven stages; barter (goods
are exchanged for goods); commodity money (a commodity is used to pay for other things); metallic
1 Chief legal advisor Julius Paulus Prudentissimus to the Roman emperor Severus Alexander described then what we know
today as the basic functions of money, i.e. unit of account, store value, and medium of exchange (see Bordo & Levin, 2017).
2 A central bank (i.e. bank of bankers) is mainly responsible for preventing financial crises through policy making and policy
goals such as price stability in relation to inflation, economic stability, and financial stability. In the face of a financial crisis,
the crucial role of a central bank is to act as the lender of last resort (i.e. provide liquidity (cash) to banks in need).
3 The Swedish Riksbank was established as a joint stock bank, followed by the establishment of Bank of England as a joint
stock company to purchase government debt. The Banque de France was created by Napoleon in 1800, and much later on
23 December 1913 the U.S. Federal Reserve System was created; two earlier central bank experiences in the U.S. (modeled
after the Bank of England) failed to achieve public trust; first Bank of the United States (1791–1811) and second Bank of
the United States (1816–1836), their licenses were not renewed after expiration.
4 Skeptic risk-averse investors caused the notable attempts by DigiCash and Peppercoin to fail; DigiCash (1990) filed for
bankruptcy in 1998. In the late 1990s, two attempts at creating a decentralized digital currency emerged; “b-money” by
Wei Dai (Dai, 1998) and Bitgold by blockchain pioneer Nick Szabo (2005); e-gold (established in 1996) reached several
million users before it was shut down by the U.S. government in 2008 citing legal issues.
5 For a longer perspective and detailed discussions on this topic and other related topics, interested readers can check out
a long list of articles published by the author, Taskinsoy (2012; 2013; 2018; 2019; 2020; 2021). The views expressed in
this paper are those of the author and do not necessarily reflect the views of institutions mentioned.
2
money (coins made from copper, silver, gold, or a mix of various metals); paper money (bank notes);
credit money (cheques, letter of credit, line of credit, revolving business account); plastic money
(credit cards, debit cards, department store cards, pre-paid cash cards); digital money (electronic
cash, digital coin, crypto-currencies such as Bitcoin); the search for a viable alternative still goes on.
Although today consumers heavily rely on credit to buy everything from homes to airplane tickets or
food, credit is not a modern invention. The recorded history shows that the earliest known cases of
consumer credit was used in 3500 B.C. for agricultural products. Hammurabi, king of the Babylonian
dynasty, took credit business to the next level by establishing the ceiling interest rates on loans for
grains (33.3%/year) and silver (20%/year).6 During the Roman Republic (50 B.C.), similar to today’s
mortgage system, lands were bought and sold on credit. However, the collapse of the Roman Empire
pushed Europe into the Dark Ages (800 A.D.), putting an end to the practice of lending (church banned
usury). By the late 15th century, the credit business was revived again with the voyages to discover
faraway lands and capital was needed to finance these missions (i.e. in 1545, England became the first
country to set a 10% legal interest rate7, see Clayton et al., 2016). Expansion of the modern consumer
credit was fueled by the birth of credit reporting8 in the early 19th century (England), and later by
the tracking of companies’ creditworthiness9 (The Mercantile Agency, New York – USA).10
Money’s persistent evolution towards cashless and cryptocurrency began with a transition from cash
to both plastic and credit money which emerged in the United States in the early 1900s. Credit card
predecessors included credit accounts for trusted customers (1800s), store credit cards by Mobil oil
and Sears (1900s), Biggins Bank’s Charg-It card (launched in 1946, accepted by Brooklyn merchants),
and Frank McNamara’s Diners Club11 (1950, initially accepted at 27 New York City restaurants). The
credit card business however took off with the launch of American Express (1958), BankAmericard
credit card (1958, it was renamed Visa in 1976), and Mastercard12 in 1966 (Stearns, 2011; Thomes,
2011). In the U.S. alone, credit cards debt totaled $1.169 trillion at year-end 2019 which amounted to
7.3% of $16.122 trillion in household debt; the top six U.S. banks accounted for $627.8 billion; of that,
Visa (the largest) had 31% of transactions worldwide in 2019 (see Figure 1).13
6 Hammurabi as the sixth king of the first Babylonian dynasty (reigned from 1792 to 1750 B.C.) wrote the Hammurabi Code
of laws where a collection of 282 rules set standards in commercial trade and enforced fines when the rules were violated.
7 British philosopher Jeremy Bentham defended the practice of usury in the treatise he wrote “A Defense of Usury” (1787).
8 In 1803, a network of English tailors exchanged information about the creditworthiness of their customers.
9 The Manchester Guardian Society (1826 – England), the Mercantile Agency (1864 - New York, USA), and Retail Credit Co.
(1899 – Atlanta, USA) are the roots of the modern credit rating agencies (i.e. Equifax, Fitch, Moody’s).
10 https://www.visualcapitalist.com/history-consumer-credit-one-infographic/
11 Diner’s Club was introduced as paper cards and was accepted at 27 New York City restaurants. By 1951, Diners Club had
about 42,000 members who were charged a $5 annual fee. Diners Club offered its first plastic credit card in 1961 and
surpassed 1 million members in the early 1960s. Diner’s Club was acquired by Citigroup in 1981.
12 Mastercard was launched as Interbank (from 1966 to 1969), Master Charge (from 1969 to 1979), MasterCard (from 1979
to 2016), and Mastercard (since 2016).

13 file:///C:/Users/hp/Downloads/credhistory.pdf
3
At the end of 2018, U.S. credit payments volumes; Visa – 336 million cards ($1.95 trillion), Mastercard
– 231 million cards ($811 billion), American Express – 53.7 million cards ($776 billion), and Discover
($143 billion). In 2018, Americans had 104 billion transactions compared with 49 billion in Europe.
Source: 2020 Nilson Report; https://nilsonreport.com/publication_chart_and_graphs_archive.php

Figure 1: U.S. general purpose volume and brands
4
Despite a massive surge in cashless transactions and contactless payment methods, which is poised
to exceed $1 trillion by 2023 (Figure 2); Cash still remains as the payment method of choice in Japan
and many EU states (Figure 3), but its reign (“cash is king”) has been diminishing as smartphone
penetration and decentralized payment systems have propelled non-cash transaction growth.
Source: Statista, https://www.statista.com/chart/20618/cashless-payments-across-the-world/

Figure 2: Number of cashless transactions (in billions)
Source: Statista, https://www.statista.com/chart/19868/share-of-cash-payments-in-different-countries/

Figure 3: Cash payments as a share of all payments in selected countries (2018)
5
People in East and Southeast Asia have been embracing touchless payments in their efforts to move
towards becoming a cashless society. While Japan along with most EU states still cling to cash, China
is leading the way in digital transformation owing to wallets (i.e. Alipay) and super apps (i.e. WeChat).
United States’ transition towards a cashless society has been much slower than China, the UK, Japan
and South Korea. For instance, the United States e-commerce volume in 2019 ($587 billion) was less
than a third of China’s $1.93 trillion (Figure 4). During 2018-2019, the growth rate of ecommerce in
the U.S. (14%) lagged behind those of China (27.3%) and South Korea (18.1%), but was better than
the growth rates of the UK (10.9%) and Japan (4.0%). In 2021, online retail sales worldwide was $4.4
trillion (see Figure 5) – more than half belonged to China ($2.78 trillion). As the world is battling with
a second wave of COVID-19 resurgence, experts project the global online retail sales to grow over $6
trillion by 2023; as this takes place, cashless and contactless payments will grow with it. In 2019,
consumers from the five Nordic countries (Sweden, Denmark, Norway, Finland, and Iceland) and the
UK were least likely to use cash (i.e. only 2% of transactions consisted cash in Sweden). However
despite a declining cash usage, cash is not going to disappear anytime soon; quite the opposite, cash
in circulation globally has kept increasing on average of 4% annually in the past five years.
Source: eMarketer.com, https://www.oberlo.com/statistics/ecommerce-sales-by-country

Figure 4: E-commerce sales by country in 2021
In 2021, China alone was responsible for more than half of all ecommerce sales worldwide; China’s
expected ecommerce sales in 2021 ($2.78 trillion) will be three times more than that of the U.S. (i.e.
$843 billion) which is the second largest ecommerce market (i.e. U.S. lost its first position to China in
less than a decade). Ironically, ecommerce sales of the UK (third largest market) is one-sixteenth of
China, this is a reflection of China’s ambition and success in adopting new technologies.
6
Source: Statista, https://www.statista.com/statistics/379046/worldwide-retail-e-commerce-sales/
Figure 5: Retail ecommerce sales worldwide (2014-23)
Among the G714, the growth of cash in circulation had been the largest in the U.S. (over 6%), whereas
Russia, Norway, and Sweden eliminated cash from circulation; in the same period, non-cash retail
transactions in China grew 9 times more than its cash in circulation (see Figure 6).
Source: Capgemini, https://worldpaymentsreport.com/cash-usage-analysis/

Figure 6: Growth of cash in circulation vs non-cash transactions, by country, 2013-2017
14 G7 (The Group of Seven) consists of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.
7
1.1 Moving Towards a Digital Global Economy: Facts15
 104 million consumers have cards in a digital format.

 47% of consumers are very interested in using digital cards in stores in the next 12 months.
 30% of consumers like to access their cards via digital wallets.
 58% of multinational firms use at least one type of cryptocurrency.
 10% of financial institutions currently provide access to at least one form of cryptocurrency.
 73% of financial institutions plan to expand access to cryptocurrencies over the next 12 months.
 63% of cryptocurrency holders are highly interested in using coins to make online purchases.
 45% of consumers say cryptocurrencies would make transactions more private.
 59% of cryptocurrency owners are interested in online purchases resulting in discounts.
 49% of consumers are highly interested in receiving online banking services.
 25% of consumers are concerned about security for not using digital-only banking services.
 62% of consumers want digital-only banks to offer debit cards.
 28% of international eCommerce merchants use IP recognition technology.
 6.8 payment methods are supported by eCommerce merchants for cross-border transactions.
 10.8 currencies eCommerce merchants support for cross-border transactions.
 73% of big-ticket buyers arranged for their payments offline.
 55% of millennials are highly interested in buying big-ticket items on digital platforms.
 59% of millennials would be highly interested in purchasing real estate via digital platforms.
 68% of payers are willing to pay a fixed fee to offer instant payments for free.
 67% of microbusinesses say free instant payment options would boost their loyalty as clients.
 20% of consumers are willing to pay to receive instant nongovernment disbursements.
 67.6% of consumers were able to pay all their bills on time in Q3 2018.
 59% of digital application users in large cities or urban areas use digital wallets.
 92% of U.S. consumers who have placed an online order.
 60% of consumers (148 million people) want to use contactless payments at the point of sale.
 32% of U.S. and U.K. businesses plan to automate cross-border receivables in the next 3 years.
 44.8% of account holders use online and mobile channels for their banking.
 75% of bank customers plan to maintain digital banking habits they adopted during the pandemic.
 89% of all 2020 holiday shoppers made at least one purchase online.
 45% of U.S. shoppers have shifted to digital channels to buy retail products.
 16% net increase in online use of credit cards since the pandemic’s onset.
 $114 billion is the estimated value of the European mobile wallet market by 2023.
 4 billion U.K. consumer transactions were powered by open banking in 2020.
 68% of adults pay for gas with mobile apps and buy it as often as once per week.
 57% of consumers consider digital payment options when deciding where to shop.
 24.7% year-over-year increase in consumers shopping and paying for food via digital channels.
15 For more details and stats, check out PYMNTS.com at https://www.pymnts.com/study/
8
Global non-cash transactions surged nearly 14% from 2018-2019 to reach 708.5 billion transactions,
the highest growth rate recorded in Asia-Pacific (24.7%). The World Payment Report predicts that
global non-cash transactions are expected to grow 12% year-over-year during 2019-2023.
Source: https://www.paymentscardsandmobile.com/world-payments-report-2020-covid-19-drives-
transformation/
Figure 7: Non-cash transaction growth 2014-2019
Source: https://www.paymentscardsandmobile.com/world-payments-report-2020-covid-19-drives-
transformation/
Figure 8: Coronavirus pandemic driven non-cash transaction growth 2019-2023
9
1.2 Central Bank Digital Currency – Coin (CBDC)
Central bank digital currencies (CBDCs) are equivalent to digital form of central bank notes, but are
fundamentally different than cryptocurrencies or crypto-assets. Unlike Bitcoin’s extreme volatility,
CBDCs as stable coins must be accepted by citizens and businesses just like fiduciary (fiat) currencies.
Each CBDC would be legal tender as well as a claim on the respective central bank or government.
According to a Bank for International Settlements (BIS) report, circa 80% of central banks have been
exploring/researching CBDC which is divided into two categories; retail CBDC and wholesale CBDC.
Currently, six countries launched CBDCs; China’s digital Yuan, Sweden’s e-krona, Bahamas’ Sand
Dollar, Eastern Caribbean Area’s DXCD, and Marshall Islands’ Sovereign (SOV).
China is one of the leading countries making the transition from conventional money to digital money,
it is also leader in the adoption of touchless payment systems (the U.S. is lagging behind). The status
of CBDCs below has been directly extracted from Atlantic Council website16; according to which (see
Figure 9 and 10), six countries launched CBDCs (the Bahamas, Saint Kitts and Nevis, Antigua and
Barbuda, Saint Lucia, and Grenada); 14 countries initiated a pilot CBDC program (China, Sweden,
Lithuania, Ukraine, Hong Kong, Thailand, Singapore, South Korea, Saudi Arabia, and United Arab
Emirates); CBDCs are in a development phase in 16 countries (Canada, Jamaica, Haiti, Brazil, France,
Japan, Russia, Switzerland, Euro Area, Turkey, Bahrain, Mauritius, South Africa, and Nigeria); 10
countries are inactive in the CBDC field (Denmark, Finland, Egypt, North Korea, Malaysia, Trinidad
and Tobago, Saint Maarten, Curacao, Venezuela, and Uruguay); while 32 countries are still in the
research phase, 2 countries canceled their CBDC program (Ecuador and Senegal).
 81 countries (representing over 90 percent of global GDP) are now exploring a CBDC. In our
original report published in May 2020, only 35 countries were considering a CBDC.
 China is racing ahead, including by allowing foreign visitors to use digital yuan if they provide
passport information to the People’s Bank of China during the upcoming winter Olympics.
 Of the countries with the 4 largest central banks (the US Federal Reserve, the European Central
Bank, the Bank of Japan, and the Bank of England), the United States is furthest behind.
 6 countries have now fully launched a digital currency. The Bahamian Sand Dollar was the first
CBDC to become widely available.
 14 other countries, including major economies like Sweden and South Korea, are now in the pilot
stage with their CBDCs and preparing a possible full launch.
 Without new standards and international coordination, the financial system may face a significant
currency exchange problem in the future.
16 To track the development status of various CBDC initiatives, see https://www.atlanticcouncil.org/cbdctracker/
10
Source: IMF Staff; Atlantic Council, https://www.atlanticcouncil.org/cbdctracker/
Figure 9: Overview of a central bank digital currency (CBDC)
11
Source: Atlantic Council, https://www.atlanticcouncil.org/blogs/new-atlanticist/how-janet-yellen-can-help-deliver-the-digital-dollar/
Figure 10: CBDC progress map
Ecuador: First country to issue a digital currency (the so-called dinero electrónico, or DE) in 2014. Widely mistrusted by citizens, the DE accounted for less than .003% of
currency in circulation in 2016 and was abolished by the National Assembly in December 2017.
Senegal: While a regional bank issued a digital version of the CFA franc, the Central Bank of the West African States disassociated from the initiative.
Brazil: In February 2020, the Central Bank of Brazil (BCB) launched its own official payment network, Pix, which allows instant money transfer and QR code scanning.
The Bank of Canada currently harbors no plans to launch a digital currency. However, it maintains an initiative to build the capability to launch a national digital currency
should the need arise.
China: In April 2020, China became the world's first major economy to pilot a digital currency.
United States has lagged most G10 economies in exploring a digital currency. The Federal Reserve is in the very early stages of research, while interest within Congress to
establish a digital dollar is growing. In August 2020, the Fed announced a collaboration with MIT researchers to build and test a digital currency for central bank uses.
Russia: Despite the Bank of Russia determining just last year that a national digital currency would provide no clear advantage to the country, the Bank of Russia Chairwoman,
Elvira Nabiullina, stated that the bank intends to pilot its own CBDC in 2021.
United Kingdom: The Bank of England recently stated that it has not yet made a decision on whether to introduce CBDC, and intends to engage widely with stakeholders on the
benefits, risks and practicalities of doing so.
12
As cash usage declines throughout the world (which has accelerated during COVID-19 induced global
lockdowns), naturally noncash transactions have been increasing and are poised to exceed 1.1 trillion
by 2023 (Figure 11), this translates to a cumulative average growth rate of 11.1% from 2019 onward.
However, the change (i.e. shifting to a digital economy) has been at a faster pace in Asia than mature
economies like the U.S. (i.e. China is the first major economy to launch its CBDC).
+8.7%
+7.4%
+14.8%
+13.5%
Source: Business Insider Intelligence17

Figure 11: Global number of noncash transactions (billion)
Under a new CBDC standard, central banks’ role and all related issues will not disappear overnight,
nonetheless CBDCs will provide some benefits that should not be ignored (Figure 12).
Source: Author
Figure 12: Benefits provided by CBDC based economy
17 https://www.businessinsider.in/finance/news/the-payments-forecast-book-2019-22-forecasts-of-the-global-
payments-industrys-most-impactful-trends-and-whats-driving-them/articleshow/71416641.cms
13
A central bank digital currency (CBDC) is a new topic spurred by the increased fame of Bitcoin (i.e.
first successful cryptocurrency) created by a mysterious engineer under the alias Satoshi Nakamoto
(a pseudonym) who launched it in January 2009 while the 2008 global financial crisis was in full
swing). Nakamoto (2008) designed Bitcoin as a purely decentralized (permissionless) peer-to-peer
network (trustless machine) of electronic cash removing trusted third-party intermediation. Bitcoin
runs on blockchain (distributed ledger) as its infrastructure technology, its mining (minting bitcoins)
operation as well as validation of transactions heavily rely on cryptography (highly secure) and proof-
of-work (PoW) consensus protocol which make Bitcoin resilient to attacks by insiders and hackers.
Current market capitalization of the cryptocurrency market (consisting of 12,866 cryptos and 412
exchanges) stands at $2.48 trillion, of which, $1.17 trillion belongs to Bitcoin ($62,270 per bitcoin).
Source: Author; Statista; https://www.statista.com/statistics/377382/bitcoin-market-capitalization/

Figure 13: Market capitalization of Bitcoin (April 2013 to February 22, 2021)
The size of the contagious Bitcoin frenzy and its fast expanding eco system are often compared with
the Dutch tulipmania of 17th century, the gold rush18 of 19th century, and the dot.com phenomenon at
the turn of the 20th century (dot.com crashed in 2001-02). However, the mindboggling growth in
Bitcoin’s popularity in less than a decade has proved that the Bitcoin craze is not a fluke as it was the
case in the dot.com boom-and-bust cycle that lasted only three years (1998-2001).
18 Bitcoin miners (nodes) today remind us the gold miners (golddiggers) during the gold rush (1849) in California who were
also called the 49ers (San Francisco’s American football team has the same name, i.e. San Francisco 49ers).
14
2.0 Literature Review
The fast rise of China is neither a coincidence nor a surprising occurrence; it is a historical fact, and
the U.S. has all reasons to worry about China’s increasing leadership in areas that have been always
associated with American supremacy. Around the time when America was discovered (1492), China
was the largest economy in the world (Maddison, 2007; Federico, 2002); about four centuries later,
it had lost this position around 189019 to another fast rising economy (the U.S.). History repeats itself,
China has reasserted the world’s largest economy status in 2014 by GDP at PPP20 (Figures 14).
Source: Visual Capitalist, https://www.visualcapitalist.com/2000-years-economic-history-one-chart/

Figure 14: 2,000 years of economic history
19 Little over a century after declaring its independence from the Great Britain (July 4, 1776), the United States emerged as
a world power; and since the late 19th century (i.e. with the Spanish-American War of 1898), American primacy and the
dollar’s hegemony were backed by the U.S. military might which happens to be the world’s most powerful and most
advanced (i.e. initially, US Navy was central to the military dominance). American exceptionalism has made U.S. the
world’s most valuable nation brand (see Williams, 1980; Kramer, 2006; Zinn, 2014; Steigerwald, 1994; Johnson, 2004).
20 GDP: Gross domestic product; PPP: Purchasing power parity.
15
Over to period to 2030 and beyond, United States’ China dilemma gets worse; while China maintains
its position as the world’s largest economy by GDP at PPP, the U.S. drops to number two in the world
by 2030 and number three by 2050 – India becomes the new number two largest economy (Table 1).
Table 1: GDP at PPP rankings

2014 2030* 2050*
PPP
Country GDP at PPP Country GDP at PPP Country GDP at PPP
Rank
2014 US$bn 2014 US$bn 2014 US$bn
1. China 17,632 China 36,112 China 61,079
2. United States 17,416 United States 25,451 India 42,205
3. India 7,277 India 17,138 United States 41,384
4. Japan 4,788 Japan 6,006 Indonesia 12,210
5. Germany 3,621 Indonesia 5,486 Brazil 9,164
6. Russia 3,559 Brazil 4,996 Mexico 8,014
7. Brazil 3,073 Russia 4,854 Japan 7,914
8. France 2,587 Germany 4,590 Russia 7,575
9. Indonesia 2,554 Mexico 3,985 Nigeria 7,345
10. United Kingdom 2,435 United Kingdom 3,586 Germany 6,338
11. Mexico 2,143 France 3,418 United Kingdom 5,744
12. Italy 2,066 Saudi Arabia 3,212 Saudi Arabia 5,488
13. South Korea 1,790 South Korea 2,818 France 5,207
14. Saudi Arabia 1,652 Turkey 2,714 Turkey 5,102
15. Canada 1,579 Italy 2,591 Pakistan 4,253
16. Spain 1,534 Nigeria 2,566 Egypt 4,239
17. Turkey 1,512 Canada 2,219 South Korea 4,142
18. Iran 1,284 Spain 2,175 Italy 3,617
19. Australia 1,100 Iran 1,914 Canada 3,583
20. Nigeria 1,058 Egypt 1,854 Philippines 3,516
Source: PwC21; * Projected
Talking about great inventions22 (i.e. gunpowder, paper, printing, and the compass), China is the place,
not the United States which is commonly known for the land of innovation and inventions. Before the
use of paper money was completely arcane to Europe and Americas (Davies, 2002), Chinese during
the Tang Dynasty (618-907 AD) was first to use privately issued paper bills to facilitate exchange. In
different phases of money’s evolution, the U.S. historically has been a flower rather than a leader, i.e.
the U.S. adopted the silver standard in 1785 and Spanish milled dollar was accepted as legal tender;
moreover, the U.S. went on the gold standard decades after (unofficially in 1873 and officially in 1900)
then the major powers already on gold (i.e. England in 1821, Germany in 1872, France in 1873, and
Japan on 1895) This time is no different, the U.S. once again lags for launching its CBDC.
21 The World in 2050 Will the shift in global economic power continue? February 2015, www.pwc.co.uk/economics
22 Top 20 ancient Chinese inventions: 1. Paper making (105 A.D.); 2. Movable type printing (960-1279 A.D.); 3. Gunpowder
(1000 A.D.); 4. Compass (1100 A.D.); 5. Alcohol (2000-1600 B.C.); 6. Mechanical clock (725 A.D.); 7. Tea production (2737
B.C.); 8. Silk (over 5,000 years ago); 9. Umbrella (1,700 years ago); 10. Acupuncture (2,300 years ago); 11. Iron smelting
(1056 – 256 B.C.); 12. Porcelain (581-618 A.D.); 13. Earthquake detector (132 A.D.); 14. Rocket (228 A.D.); 15. Bronze
(1700 B.C.); 16. Kite (3,000 years ago); 17. Seed drill (3,500 years ago); 18. Row crop farming (6th century B.C.); 19. Tooth
brush (1498); and 20. Paper money (9th century); for more details, see USC US – China Institute
https://china.usc.edu/sites/default/files/forums/Chinese%20Inventions.pdf
16
At least half of central banks around the world have begun researching or launching CBDCs to replace
their existing fiat currencies (e.g. Barontini & Holden, 2019; Boar & Wehrli, 2021)23, nonetheless some
Fed officials are divided on the concept of a Fed-backed digital currency to replace U.S. paper dollar
bills and coins. In response to China’s rush to launch its CBDC (e-yuan or e-renminbi), Fed Chairman
Jerome Powell has elaborated that “I think it’s way more important to do it right, than to do it fast”,
the Fed Chief also commented that launching a Fed-backed digital dollar would eliminate Bitcoin and
altcoins.24 Most central bank officials agree that CBDCs will improve financial inclusion (Figure 15).
Source: Global Findex database; Demirgüç-Kunt et al (2018)

Figure 15: Financial institution account ownership
Despite positive contributions of disruptive technologies (internet, blockchain, etc.) to the evolution
of money, still 31% (1.7 billion) of adults in 2017 were unbanked. Gender gap in financial exclusion
has persisted; for example, 28% of men as opposed to 35% of women did not have an account at a
financial institution or access to mobile money accounts (Demirgüç-Kunt et al., 2018). According to a
survey conducted biennially by the Federal Deposit Insurance Corporation (FDIC), 6.5% (8.4 million)
of U.S. households (129.3 million) were unbanked (50 million adults were underbanked, Table 2).
Table 2: U.S. household financial inclusion status by year
Number of Banked, underbanked

Unbanked Underbanked Fully banked
Year Households status unknown
(Percent) (Percent) (Percent)
(1000s) (Percent)
2013 123,750 7.7 20.0 67.0 5.3
2015 127,538 7.0 19.9 68.0 5.0
2017 129,276 6.5 18.7 68.4 6.3
Source: FDIC National Survey (2018)
23 BIS surveys of central banks in 2018 and 2020 show the majority of central banks have begun to explore CBDCs.
24 https://www.cnbc.com/2021/07/16/jerome-powell-promotes-cbdc-digital-dollar-warns-against-stablecoins.html
17
Sovereign (central bank) digital currencies will most likely harness the same technology (blockchain
using cryptography and distributed ledger) that gave life to bitcoin and its prodigies (altcoins), but
without the volatility (Bordo & Levin, 2017; Broadbent, 2016; Mersch, 2017). CBDCs (fiat currencies
in digital form) are essentially different from cryptocurrencies; first and most importantly, a CBDC is
a replacement of a fiduciary currency issued, governed, and its price set by a central bank; unlike
bitcoin and other cryptocurrencies25 (e.g. Baek & Elbeck, 2015; Bartos, 2015; Blundell-Wignall, 2014;
David, 2014; Dwyer, 2014), CBDCs as legal tender are not categorized/classified as speculative assets,
commodities, securities, or properties for tax purposes. Each CBDC will probably run on a centralized
blockchain and be accepted as a medium of exchange by merchants and consumers worldwide.
The classical gold standard resulted in price level stability, but it was brief; more importantly, it still
failed to prevent banking crises from occurring (i.e. 17 banking crises between 1880 and 1913).
Table 3: Banking crises in countries on gold standard

Years on gold Number of Years on gold Number of
Country Country
standard banking crises standard banking crises
Austria-Hungary 18 0 Italy 20 2
Argentina 17 0 Netherlands 34 1
Belgium 34 0 Norway 34 1
Brazil 9 0 Portugal 11 1
Canada 34 0 Russia 17 0
Denmark 34 2 Sweden 34 2
France 34 2 Switzerland 34 0
Germany 34 2 United Kingdom 34 1
Greece 4 0 United States 34 3
Source: Weber (2015); Reinhart and Rogoff (2009a, b);
Table 4: Average and standard deviation of annual inflation
Average
Country Standard Dev.
1880 - 1913 1880 - 1895 1895 - 1913
Belgium 0.06 -1.87 1.67 3.79

Canada 0.77 -0.89 2.15 3.86
Denmark -0.25 -1.12 0.48 2.64
France 0.05 -0.53 0.74 3.43
Germany 0.42 -1.26 1.83 4.73
Netherlands 0.17 -0.53 0.74 1.93
Norway 0.62 -0.81 1.82 2.83
Sweden 0.29 -1.75 1.98 3.83
Switzerland -0.07 -1.92 1.47 3.81
United Kingdom -0.32 -2.35 1.38 3.88
United States -0.10 -1.31 1.45 2.00
Overall 0.19 -1.32 1.45 3.85
Source: Weber (2015)
25 The market capitalization of bitcoin (as of October 24, 2021) stands at $1.15 trillion ($60,991 per bitcoin); Ethereum
($484.51 billion), Binance Coin ($79.91 billion), Cardano ($70.52 billion), and Tether ($69.59 billion). The total market
cap of 13,039 cryptocurrencies is $2.55 trillion (Bitcoin’s dominance is 45.1% market share). For more details on
18
Weber (2015) investigated price level stability (i.e. inflation) and banking crises during the classical
gold standard (1880s – 1913). Based on his analyses, 10 out of 18 countries in Table 3 underwent at
least one banking crisis while on the gold standard (i.e. five countries had 2 crises and the U.S. had
three); furthermore, Table 4 shows 11 countries experiencing deflation during 1880-95 (i.e. Belgium,
Switzerland and United Kingdom had deflation greater than 1.8%) and inflation between 1895 and
1913 (i.e. Canada, Norway, Germany, and Sweden had inflation greater than 1.8%). Nearly a century
later (gold standard collapsed after England went off gold in 1931), we are now faced with CBDCs,
but central bank officials around the world want to take a cautious approach to this new wave in the
evolution of money because they are specifically concerned as to how digitalization of fiat currencies
will manage to cope with adversaries related to monetary policy, financial stability, payment system,
privacy of consumers, operational risks, and financial intermediation (see Adrian & Mancini-Griffoli,
2019; Andolfatto, 2018; BIS, 2018; Fernandez-Villaverde et al., 2020).
While less than a dozen of small countries do not have a central bank26, three quarters of the world’s
bank assets are predominantly controlled by a handful of countries (i.e. China, United States, Japan,
and the Eurozone consisting 27 countries, which was 28 before Brexit27). Table 5 shows total bank
assets held by top ten central banks28, the combined assets amount to $31,007,531,000,000.
Table 5: Central bank rankings by total assets

Rank Profile Total Assets Type Region
1. US Federal Reserve System $8,201,651,000,000 Central Bank North America
2. Bank of Japan $6,548,870,000,000 Central Bank Asia
3. People's Bank of China $5,144,760,000,000 Central Bank Asia
4. Deutsche Bundesbank $3,103,230,000,000 Central Bank Europe
5. Bank of France $2,138,080,000,000 Central Bank Europe
6. Bank of Italy $1,592,110,000,000 Central Bank Europe
7. Bank of England $1,291,640,000,000 Central Bank Europe
8. Bank of Spain $1,135,110,000,000 Central Bank Europe
9. Swiss National Bank $1,131,370,000,000 Central Bank Europe
10. Central Bank of Brazil $720,710,000,000 Central Bank Latin America
Source: https://www.swfinstitute.org/fund-rankings/central-bank
Fed and central bank officials are divided on the CBDC matter, therefore their opinions are varied and
disparate. Aside from operational risks along with complex design and functionality issues, various
strands of the literature now beg for compelling answers on how CBDCs’ negative consequences will
in fact affect existing banking systems (i.e. financial intermediation), monetary policy, inflation, and
financial stability (see Chiu et al., 2020; Keister & Monnet, 2020; Williamson, 2019).
26 Andorra, Isle of Man, Kiribati, Marshall Islands, Micronesia, Monaco, Nauru, Palau, and Tuvalu.
27 United Kingdom (the UK) withdrew from the European Union (EU) at 23:00 GMT on 31 January 2020.
28 https://www.swfinstitute.org/fund-rankings/central-bank
19
2.1 Benefits, Risks, Consequences, and Concerns
The relationship between the Fed, cryptocurrencies and stable coins is like being in a mob family,
everybody is afraid of everybody; but according to Fed Governor Randal Quarles29, the Fed should not
fear stablecoins, nor should it fear cryptocurrencies. These two asset types are also afraid of the U.S.
launching its own central bank-backed digital dollar because Federal Reserve Chair Jerome Powell
says30 “you wouldn’t need stablecoins, you wouldn’t need cryptocurrencies if you had a digital U.S.
currency - I think that’s one of the stronger arguments in its favor" (for more details, see Bullmann et
al., 2019; Berentsen & Schar, 2018; ECB, 2019, 202; FSB, 2020; G7, 2019; Petralia et al., 2019).
Although central banks have been rather slow on embracing the concept of CBDCs, but research and
experiments with digital currency (electronic cash) began in the 1980s, i.e. Chaum’s (1982) proposal
of “untraceable payments”. Just a few years later, Tobin (1987) had even suggested that central banks
(to be the forefront in the digital era) could develop their own digital currencies (i.e. digital, e-dollar).
Auer and Böhme (2021) assert that the design of CBDCs should be “minimally invasive,” plus similar
to cash, CBDCs should be a direct claim on the central bank (Figure 16). Cryptocurrencies (i.e. bitcoin),
to a degree, satisfy the basic functions of money but not used for everyday transactions due to extreme
volatility; Auer and Böhme (2021) argue that if the accelerated move towards a cashless society (i.e.
COVID-19 induced global lockdowns contributed significantly to this trend) prevails, all central banks
around the world will be forced to launch their CBDCs (some countries already have, see Table 6).
Source: Auer and Böhme (2021)

Figure 16: Cash, electronic payment instruments, and retail CBDC
29 Financial Stability Board chair and Federal Reserve Vice Chairman for Supervision. Randal K. Quarles took office as a
member of the Board of Governors of the Federal Reserve System on October 13, 2017.
30 https://www.reuters.com/business/feds-powell-says-stablecoins-need-appropriate-regulatory-framework-2021-07-14/
20
According to the Bank for International Settlements (BIS) survey (BIS, 2018; Boar & Wehrli, 2021),
86% of central banks have begun either researching, piloting or getting ready to launch CBDCs in an
effort to replace their physical paper bills and coins. BIS along with advocates see CBDCs as a unique
opportunity for the current monetary system besieged by the dollar (BIS, 2021; GCB, 2020). Table 6
shows several countries at the forefront in developing or launching a CBDC.
Table 6: Countries either launched or in the process of launching CBDC
Bahamas Sand Dollar to be rolled out by the end of 2019.

Barbados Blockchain-based version of the Barbadian dollar released in 2016.
China Digital Currency Electronic Payment (DCEP) expected to launch soon.
France Bank of France plans to start pilot testing a CBDC in early 2020.
Marshall Islands Marshallese Sovereign (SOV) to be released in near future.
Central banks of the two gulf nations will jointly issue a digital currency named “Aber”
Saudi Arabia and UAE
for interbank money transfer.
Sweden E-krona project started in 2017 to study the need and feasibilities for a CBDC.
Prototype developed for a wholesale CBDC used for real time interbank settlements.
Thailand Testing of cross-border transfer under way. No immediate plan for retail or general
purpose CBDC for consumers.
Turkey Pilot test of digital Lira expected to be completed by the end of 2020.
Uruguay E-peso successfully piloted from Nov. 2017 to Apr. 2018.
Source: Brookings31
Benefits of central bank-backed digital currencies (CBDCs)
o CBDCs can provide benefits (i.e. lower cost, higher transaction speed, and timely policy actions)
if they are granted legal tender status, used as a universal means of payment, and have a direct
legal claim on central bank just like the existing fiduciary currencies; moreover, CBDCs by no
means will supplant commercial banks but complement their role in financial intermediation
(BIS, 2009; Berentsen & Schar, 2018; Carstens, 2021; Sablik, 2016; Sveriges Riksbank, 2020).
o A CBDC based monetary system may have fewer financial crises in systemic nature as CBDCs will
have a direct legal claim on central banks, therefore the likelihood of private financial institutions
becoming insolvent may be mitigated. Since money was first invented (see Davies, 2002; Graeber,
2001), it has been widely used to develop new technologies and create more advanced societies;
in return, new technologies gave direction to money’s unabated evolution; from primitive barter
to metallic (silver and gold standards), to fiat (collapse of the Bretton Woods system of fixed
exchange rates and President Nixon’s decision in 1971 to cut dollar’s link to gold) and finally, to
31 https://www.brookings.edu/blog/techtank/2019/12/13/the-current-landscape-of-central-bank-digital-currencies/
21
cryptocurrency (Satoshi Nakamoto launched Bitcoin in Jan 2009) that has spurred central banks32
to develop their own CBDCs (Adrian & Mancini-Griffoli, 2019; BIS, 2018; Boar & Wehrli, 2021).
o CBDCs will make both domestic and cross-border payments as well as transfers (i.e. send and
receive money) easier, faster, cheaper (i.e. the Federal Reserve paid close to $1 billion in 2020 for
the cost of printing and distributing dollar bills), efficient, and more transparent.33
Source: The Federal Reserve, https://www.federalreserve.gov/paymentsystems/coin_data.htm

Figure 16: Federal Reserve expenses for cash operations
o CBDCs will substantially increase financial inclusion worldwide as a public good for unbanked
and underbanked people (i.e. over 2 billion without a bank account, e.g. Demirgüç-Kunt et al.,
2018)) who either live in poor countries and rural areas or do not have access to the internet
through mobile phones or by a service provider. CBDCs will also keep tiny nations in mountainous
regions (i.e. Tibet) and remote locations (i.e. Pacific nations) financially connected to the world’s
financial centers, this in turn will contribute positively to local economies.
o Contrasting Bitcoin (permissionless - decentralized) and altcoins, CBDCs will use permissioned
and centralized blockchains, which will give respective central banks a greater ability to trace
payments toward illicit activities known as money-laundering, terrorism financing, illegal drugs
and human trafficking (Bonneau et al., 2015; Brill & Keene, 2014).
32 More than three quarters (over 80%) of central banks in the world are currently either researching, piloting or getting
ready to launch their CBDCs. China as a major economy is almost ready to launch its digital-yuan (or e-yuan), and by 2025,
ECB may launch its CBDC (e-euro). But the Fed has not announced a timeframe for its CBDC as it is moving cautiously.
22
o A large number of unbanked people throughout the world do not trust banks; while about 20%
of unbanked adults in the world cited “lack of trust” as one of the last reasons for not having an
account (Figure 17), almost one-third of unbanked U.S. households (30.2%) gave “lack of trust”
as the second-most commonly cited reason for not opening an account (Figure 18).
Source: Demirgüç-Kunt et al (2018)

Figure 17: Reasons for not having an account (World)
Source: Federal Insurance Deposit Corporation – FDIC (2017)

Figure 18: FDIC national survey of unbanked and underbanked U.S. households
23
o Global warming is not something taking place in a distant future, it is already with us. The Earth
is suffocating and every help counts; in that regard, CBDCs run on blockchain can help to reduce
global warming and its most emblematic impact on climate change (for melting glaciers and polar
ice, see Oerlemans, 2005). Through CBDCs (paperless world), less carbon will be released from
the biosphere; as a result of less deforestation34, the Earth’s carbon cycle will be more balanced.
CBDCs can save millions of trees, Table 7 shows an analysis by Taskinsoy (2019s; 2021g).
Table 7: Comparative analysis between money and deforestation
US bills (5, 10, 20, 50, 100 denominations) Weighs 1 gram (1 pound = 454 gr)35
All physical money in circulation in the world $75 trillion
1 ton of $1 dollar bills is worth (908,000 x $1) $908,000
$75 trillion / $908,000 82,599,119 tons of paper
To produce 1 ton of standard office paper 24 trees are cut36
82,599,119 tons of paper x 24 trees 1,982,378,855 trees
Globally 80,000 trees are cut a day (1,982,378,855 /80,000) 24,780 days of deforestation (67.89 years)
Source: Author, Taskinsoy (2019s) is updated, Taskinsoy (2021g)
o CBDCs will enable central banks (policy makers) and other branches of governments to exercise
a tighter control (this could be a risk as well) over financial transactions. Since CBDCs are backed
by central banks, they are safer; the flipside to this is that financial intermediation by commercial
banks may get negatively affected especially if accounts are directly held with central banks (i.e.
reduced intermediation by commercial banks may force them to raise fees for products/services
and rates on bank loans, this in turn may cause investors harbor their money in cryptocurrencies).
o If designed properly and regulated appropriately (i.e. not depriving banks of deposits that is their
main source of revenue), digital dollar can continue to enjoy its prolonged global primacy.
o Money is at the heart of economic activity and the resultant growth; therefore, money’s unabated
evolution must continue in the digital form to harness potential benefits from blockchain or other
new and advanced technologies. Central banks should not try to curb the progress of CBDCs just
to defend their fiat money; on the contrary, they must use the CBDC opportunity to evolve.
o Cryptoassets along with decentralized finance platforms and stablecoins raise concerns and pose
risks to monetary and financial stability. As central banks are ready to embark on the journey of
digital money (hope), well-designed CBDCs will provide answers to all our concerns.
34 Most of deforestation is done by soya farmers. Soya is mainly produced in Americas (north & south), half of the world’s
soya comes from Brazil and Argentina, and nearly the other half is produced in the United States.
35 https://www.michigan.gov/kids/0,4600,7-247-49025-34615--,00.html
36 The Global Forest Resource Assessment shows that about 80,000 to 160,000 trees are cut every day due to deforestation
https://www.worldatlas.com/articles/how-many-trees-does-it-take-to-make-1-ton-of-paper.html
24
Risks and concerns of central bank-backed digital currencies (CBDCs)
o With the emergence of CBDCs, a concern is often voiced out that central bank-backed currencies
will ultimately cause a noticeable decrease or a total elimination of intermediation by commercial
banks and non-bank financial institutions. However, this may be easier said than done because
important operational tasks are handled by the private sector such as effective allocation of funds
from savers to investors (savings), retail payments, compliance with regulation related to money
laundering and terrorism financing (see Borio, 2019; Carstens, 2019; Auer & Böhme, 2021).
o Commercial banks mainly make money from fees and interest rates charged on loans generated
from deposits. The difference between physical cash and deposit accounts is that the former is a
direct claim on the central bank whereas the latter are claims on commercial banks and could face
financial losses due to insolvent banks under highly adverse market conditions; furthermore,
physical cash earns no interest and its value can diminish in time due to inflation and other risk
factors. Some central bank officials along with economists and scholars are worried that CBDCs
may potentially become an attractive vehicle for savings and hedging (flight to safety), this could
leave banks at the risk of possible runs on deposits. Direct and indirect negative impacts of such
events on the broader economy may lead to more insolvent banks (i.e. drying up deposits as their
main source of revenue), contraction as some banks may hoard capital, higher inflation, bankrupt
SMEs, and financial instability (Andolfatto, 2018; BIS, 2018; Fernandez-Villaverde et al., 2020).
o A central bank has three key roles; 1) effective monetary policy and control of money supply to
achieve both price and financial stability; 2) lender of last resort (provide liquidity as the banker
of banks); 3) regulation and banking supervision (sound banks). The allocation of resources from
savers to investors and borrowers is not one of central bank functions, handled by commercial
banks and other financial intermediators; but bank executives are worried that central banks with
CBDCs may end up assuming this role (Brunnermeier & Niepelt, 2019; Schnabel & Shin, 2018).
o The current cash-based financial system has many dimensions, layers, and integral components;
for its normal-functioning, not only all three are necessary but vitally important. For a free and
open market that adheres to market-based solutions complemented by competition, a worry with
CBDC design that the existing three-tiered financial architecture will not be mirrored, i.e. central
bank (sound governance), commercial banks (fund allocation via new loan generation), and non-
bank financial intermediators (niche markets). Each tier has unique expertise and knowledge,
taking one (i.e. commercial bank intermediation) out of a financial system may result in repeated
debasement of money and financial crises. Therefore, a design of CBDC would be incomplete
without the inclusion of commercial banks which are vital in promoting competition, innovation,
economic efficiency, and public welfare (Bindseil, 2020; GCB, 2020; Hayek, 1945; Borio, 2019).
25
o A transition from fiat currencies to central bank digital currencies is under way around the world,
and China has already launched its pilot program for the e-CNY (digital yuan) while the Federal
Reserve and Bank of England are moving rather cautiously. Privately issued cryptocurrencies (i.e.
Bitcoin, Ethereum, etc.) and stablecoins have sprouted like wild mushrooms which, according to
central bank officials and some economists including several laureates of the Nobel Memorial
Prize in Economic Sciences (Paul Krugman, Joseph Stiglitz, James Heckman, etc.), pose a risk to
the twin stability (monetary and financial). In terms of the value of sovereign nations’ currencies
in circulation, Bitcoin ranks 14th in the world by market capitalization.
Table 8: Market cap of fiat currencies in BTC (2021)
Rank Flag Currency Market Cap Circulating Supply Max Supply
Chinese Yuan
1. 593,079,820 BTC 234,280,000,000,000 CN Unlimited
CNY
U.S. Dollar
2. 346,673,228 BTC 21,401,805,853,000 USD Unlimited
USD
Euro
3. 266,069,760 BTC 14,153,442,000,000 EUR Unlimited
EUR
Japanese Yen
4. 216,689,901 BTC 1,520,746,000,000,000 JPY Unlimited
JPY
Pound Sterling
5. 76,379,139 BTC 3,452,743,000,000 GBP Unlimited
GBP
South Korean
6. 65,992,714 BTC 4,786,150,000,000,000 KRW Unlimited
Won KRW
Indian Rupee
7. 42,408,253 BTC 195,675,000,000,000 INR Unlimited
INR
Canadian
8. 40,577,772 BTC 3,104,184,000,000 CAD Unlimited
Dollar CAD
Hong Kong
9. 33,522,157 BTC 16,104,828,000,000 HKD Unlimited
Dollar HKD
Australian
10. 31,267,677 BTC 2,581,000,000,000 AUD Unlimited
Dollar AUD
New Taiwan
11. 30,710,436 BTC 52,786,682,000,000 TWD Unlimited
Dollar TWD
Brazilian Real
12. 24,238,594 BTC 8,499,651,000,000 BRL Unlimited
BRL
Swiss Franc
13. 20,626,160 BTC 1,158,101,000,000 CHF Unlimited
CHF
Bitcoin
14. 18,850,654 BTC 18,861,343 BTC 21,000,000 BTC
BTC
Russian Ruble
15. 13,739,319 BTC 60,606,000,000,000 RUB Unlimited
RUB
Thai Baht
16. 11,449,686 BTC 23,524,000,000,000 THB Unlimited
THB
Source of data: CoinMarketCap; https://coinmarketcap.com/fiat-currencies/
26
Stablecoins and CBDCs
Stablecoins (i.e. Tether) are cryptocurrencies, but unlike Bitcoin and altcoins (i.e. Ethereum), their
values are pegged to fiat money, precious metals (i.e. gold), commodities, or cryptocurrencies; the
latter is more complex (i.e. smart contracts are used) and still subject to extreme volatility because
cryptocurrencies are used as the underlying collateral. Bitcoin (alpha) dominates the cryptocurrency
market; therefore, any drop in its value triggers a widespread price falls (i.e. Bitcoin and altcoins are
highly correlated). The G20 Governors made a distinction between crypto-assets (i.e. Bitcoin) and
stablecoins (i.e. Facebook digital currency Diem, formerly known as Libra37) in terms of their threat
to the global financial stability. While crypto-assets are considered to be no threat (but not to say
completely free of risks), global stablecoins on the other hand are argued to pose a threat as well as
certain challenges38 to the existing global financial system; yet, G20 Leaders had noted that the vast
scalability aspect of stablecoins is an undeniable benefit to the global financial system (FSB, 2019).
o Since the Chinese during the Tang Dynasty (618-907 AD) used privately issued paper money to
facilitate exchange, for the first time fiat currencies are on the verge of becoming extinct. Future
is here; money’s transformation into digital began with bitcoin, sprouted by altcoins, moved into
widespread uses by stablecoins and global payment systems (i.e. China’s Alipay and WeChat)39,
and finally CBDCs, the development of which has been accelerated by the COVID-19 pandemic.
o Traditional financial intermediation (i.e. post-WWII monetary order agreed by delegates of the
allies at the 1944 Bretton Woods Conference) is challenging in a profound way with stablecoins
big tech firms have either introduced or in the process of launching (e.g. Carstens et al., 2021).
o A chorus of economists and central bank officials believe the encroachment of private digital
currencies (stablecoins) has spurred central banks around the world to research technical
aspects of CBDCs as well as to investigate both risks and benefits (BIS, 2021). While some
lawmakers and regulators in the U.S. are concerned that these unregulated private fintech
instruments could reduce reliance on the U.S. dollar as the main global reserve currency,
others share the view that CBDCs can reduce the cost of mone y and intermediation by
increasing financial inclusion (i.e. about two billion unbanked people worldwide).
37 Originally, Facebook proposed a stable coin Libra in June 2019 and planned to launch it in June 2020; but due to strong
opposition from U.S. regulators (and around the world), the project’s major backers including Visa left and Facebook
decided to launch Diem later in 2021 which will be pegged to the U.S. dollar (USD).
38 Challenges include; disruptions to global financial stability; consumers’ privacy protection and exploitation of users’ data;
cyber security; illicit activities on terrorism-financing, money-laundering, illegal drugs and human trafficking; regulatory
compliance and supervision; national security; discrepancies in country-specific regulation/supervision, rules and laws;
unbanked people; gaming the system; transparency and governance; sovereign currencies; tax matters; and uncertainty.
39 China is at the forefront of transitioning from physical money to a CBDC; In China, there are 782.4 million online shoppers,
854 million online payment users, and 852.4 million mobile payment users. For more statistics and facts on digital
payments in China, see https://www.statista.com/topics/1211/digital-payments-in-china/#dossierKeyfigures
27
o In the 18 th century, there were already well-established national banking systems in
Europe, but at the time, the newly independent U.S. (July 4, 1776) had no national banking
system, no central bank (created in 1913), and no currency of its own ( Pound sterling and
Spanish dollar were granted legal tender).40 Between 1836 and 1865 (referred to as the Free
Banking Era in the U.S.), numerous private banks (“wildcat banking”) issued bank notes;
on that note, Sen. Elizabeth Warren 41 asserted that stablecoins are no different than those
“wildcat notes” that were issued by the wildcat banking in the 19th century. 42
o Advocates of stablecoins and cryptocurrencies strongly argue that central banks, regulators and
law makers running headlong into backlash to Facebook’s Libra43 coin (now Diem) may backfire
and cause inadvertent damages to consumers as well as adverse effects on developments of future
technologies (Reitman, 2019). Christine Lagarde, former Managing Director of the International
Monetary Fund (IMF) and current President of the European Central Bank, urged central banks
not to ignore “winds of change” and consider looking into the case of central bank digital currency
(Lagarde, 2018; Bech & Garatt. 2017; Mancini-Griffoli et al., 2018; McLeay et al., 2014).
o Trump slammed Bitcoin and stablecoins (Libra) by tweeting44 “I am not a fan of Bitcoin and other
cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air”.
To remind people of the American primacy and dollar’s prolonged hegemony (since the Bretton
Woods Conference of 1944, but especially since 1971 when President Nixon cut dollar’s link to
gold), President Trump tweeted “We have only one real currency in the USA, and it is stronger
than ever, both dependable and reliable. It is by far the most dominant currency anywhere in the
world, and it will always stay that way. It is called the United States Dollar!”45
o Mark Zuckerberg, Chief Executive Officer (CEO) of Facebook, argued that Libra was designed as a
stablecoin (more secure and stable than cryptocurrencies) which would be backed by its “Libra
Reserve” – a basket of four low-volatile fiat currencies (i.e. dollar, euro, pound, and yen) plus low-
risk central bank reserves. Due to strong regulatory hurdle, Facebook cancelled the Libra project
and has announce its new Diem coin that will be pegged to the U.S. dollar.
40 While the American Revolutionary War (1775-83) was in full swing, on 4 July 1776, the Continental Congress declared
independence from the Great Britain, and changed its name to “the United States of America”. The newly independent
United States introduced dollar in April 1792 as its national currency and the sign “$” as its symbol, which eventually
replaced Continental currency and various foreign currencies including Pound sterling and Spanish dollar. There was no
shortage of financial panics during 18th and 19th centuries, US Congress passed the Federal Reserve Act of 1913 which
created the Federal Reserve System and President Wilson signed it into law on December 23, 1913.
41 https://time.com/6099105/us-china-digital-currency-central-bank/
42 Wikipedia, https://en.wikipedia.org/wiki/Wildcat_banking
43 The term “Libra” was first used as a unit of weight in Ancient Rome, it is also one letter different from French word “libre”
which is the root of “liberty or freedom”. Libra’s symbol of waves suggests that money flows without borders with hassle
free and little or no transaction cost
44 Following Facebook’s formal announcement of its Libra project on 18 June 2019, about three weeks later Trump tweeted
(3:15 AM – Jul 12, 2019); https://www.foxbusiness.com/markets/bitcoin-price-tumbles-trumps-criticism

45 He tweeted (3:15 AM – Jul 12, 2019); https://www.foxbusiness.com/markets/bitcoin-price-tumbles-trumps-criticism
28
Opinions of central bank officials regarding CBDCs
o The Bahamas launched the world’s first CBDC called “Sand Dollar’ in October 2020, and over
100,000 people in China have already begun experimenting with the digital yuan (e-yuan) as part
of China’s pilot of its CBDC. By 2025, experts believe that most central banks of advanced nations
will have rolled out their respective CBDCs. Once the world leader in innovative technologies and
payment systems, the U.S. is shockingly outpaced by a tiny island nation Bahamas. Furthermore,
the Bank for International Settlements (BIS) has initiated the world’s first central bank
digital currency exchange program called by the codename “Project Dunbar”. 46
o Federal Reserve Chair Jerome Powell has stressed that USDC (i.e. digital dollar or e-dollar) would
unquestionably be a more viable alternative than stablecoins and cryptocurrencies that in recent
years have sprung up like wild weeds (currently, 13,598 cryptos exist with a combined market
capitalization of $2.71 trillion, of which, $1.16 trillion belongs to Bitcoin alone); Powell further
elaborated that “you wouldn’t need stablecoins, you wouldn’t need cryptocurrencies if you had a
digital U.S. currency - I think that’s one of the stronger arguments in its favor".47
o Except in El Salvador where Bitcoin is legal tender (President Nayib Bukele has signed the law
that entered into force on September 7, 2021), cryptocurrencies and stablecoins are classified as
either assets, commodities, or securities for tax purposes. In terms of their likelihood of becoming
a main payments vehicle in the U.S., the odds are looking better for stablecoins but not without
major regulation, Powell has said "We have a pretty strong regulatory framework around bank
deposits, for example, or money market funds," which “doesn’t exist currently for stablecoins, and
if they’re going to be a significant part of the payments universe - which we don’t think crypto
assets will be but stablecoins might be - then we need an appropriate regulatory framework".48
o The Bank of England (BofE) says stablecoins should not be treated differently than fiat currencies
in terms of regulatory compliance. China’s hyperfocus on controlling data and the government’s
ambitious efforts for decades put China at the forefront of transitioning from fiat money to central
bank issued digital currency (i.e. already over $40 trillion in mobile transactions). Rogoff (2021)
argues the dollar’s days are numbered as America’s “exorbitant privilege” is ever more becoming
“more fragile than it appears”. In the face of unfolding events in the CBDC arena, England and
United States are far behind China in the development of a CBDC (i.e. ranked 18th or higher in the
world, see Rogoff, 2021). BofE Governor Andrew Bailey elaborates “We live in an increasingly
digitalized world where the way we make payments and use money is changing rapidly. The
46 https://www.bloomberg.com/news/articles/2021-09-02/central-bank-digital-currencies-to-be-tested-in-bis-
experiment?sref=vSMPql2x
29
prospect of stablecoins as a means of payment and the emerging propositions of CBDC have
generated a host of issues that central banks, governments, and society as a whole, need to
carefully consider and address. It is essential that we ask the difficult and pertinent questions
when it comes to the future of these new forms of digital money”.49
o In the post WWII, the U.S. and respective allies (i.e. the Western Bloc and the Eastern Bloc) had
successfully sabotaged the Soviet Union’s influence and economic expansion with proxy wars (the
Cold War). In the view of the U.S. government, there is a new enemy (China) whose actions are
potentially “a painful blow” (Rogoff, 2021) to what the U.S. has built over half a century time (since
the Bretton Woods Conference of 1944). However, the Fed has softened its hostile approach to
stablecoins after Mark Zuckerberg50 urged the U.S. to move swiftly to combat the threat posed by
China’s plans to launch the digital yuan. After Facebook’s announcement of Libra as a stablecoin,
French Finance Minister Bruno Le Maire said stablecoins (referring to Libra) are most harmful to
sovereignty, he urged the European Central Bank (ECB) to issue its own CBDC.51
o Turkey is one of a dozen of countries set to roll out its CBDC soon (by 2022 or 2023).52 The Turkish
Central Bank (TCMB) has announced that it expected to complete its pilot test of digital Lira by
the end of 2020. The TCBM officials said we "continue to research the potential benefits of
introducing a digital Turkish lira to complement the existing payments infrastructure". For the
research, development and pilot of the digital lira, the Turkish government has also announced
that agreements have been signed with defense and technology firms Aselsan and Havelsan, as
well as with the Scientific and Technological Research Council of Turkey (TUBITAK).53
o Throughout history, revolutionary inventions from the wheel to airplane have transformed life
on the Earth. Each modern invention54 (i.e. automobile, steam engine, railways, and airplane) plus
major discoveries (i.e. coal, petrol, natural gas, nuclear and solar power) triggered a race among
industrialized nations. The U.S. is lagging at least a decade behind China in the development of a
CBDC, many wonder whether the U.S. is in delusion or unaware of a race in the digital evolution
of money, but it is better late than never; the Fed Chair Powell said the Fed has “stepped up its
research and public engagement” through “Project Hamilton” (a joint exploration with MIT).55
o In the development of a CBDC, a worry that the U.S. is not only lagging behind China but is trailing
even underdeveloped (i.e. Kenya) and developing countries (i.e. Turkey, India, Brazil, etc.). Oddly,
it is unclear what is holding the U.S. back. Some economists, policymakers, and experts point
49 https://www.finextra.com/newsarticle/38200/bank-of-england-lays-down-regulatory-expectations-for-stablecoins
50 During his testimony to the House Financial Services Committee on October 23, 2019.
52 Anadolu Agency (AA), https://www.aa.com.tr/en/energy/finance/turkey-to-roll-out-digital-currency-soon/27281
53 AA, https://www.aa.com.tr/en/economy/turkish-central-bank-signs-agreement-for-digital-currency/2365941
54 https://interestingengineering.com/35-inventions-that-changed-the-world
55 Federal Reserve Bank of Boston initiated a joint exploration of a CBDC with Massachusetts Institute of Technology.
30
finger to powerful commercial banks that dominate the U.S. financial landscape. The American
Bankers Association said “the proposed benefits of CBDCs to international competitiveness
and financial inclusion are theoretical, difficult to measure and may be elusive,” “while the
negative consequences for monetary policy, financial stability, financial intermediation,
the payments system, and the customers and communities that banks serve could be
severe”. The ABA’s message is clear and loud, the Fed has no constitutional authority to
issue a CBDC, meaning the ABA has to be aware of the race not the Fed. 56
o Governor of the Bank of England, Andrew Bailey, says that intermediation by the current banking
regime must be reflected in any regulatory model related to stablecoins and CBDCs. He elaborates
“We live in an increasingly digitalized world where the way we make payments and use money is
changing rapidly. The prospect of stablecoins as a means of payment and the emerging
propositions of CBDC have generated a host of issues that central banks, governments, and society
as a whole, need to carefully consider and address. It is essential that we ask the difficult and
pertinent questions when it comes to the future of these new forms of digital money.”57
o The popular view among the Federal Reserve bankers is that “a digital U.S. dollar is inevitable,”
nonetheless Philadelphia Federal Reserve President Patrick Harker argues that the U.S. should
not rush to issue a CBDC just because China is rolling out its digital yuan. Moreover, Fed Governor
Lael Brainard cautions that the U.S. should only issue a CBDC after all questions related to privacy,
financial stability, operational risks (retail and wholesale), and monetary policy are answered.58
o Although Bitcoin and its prodigies (mushroomed altcoins) have generated no urgency for the Fed
to move on a Fed-backed digital currency, nevertheless Brainard (advocate of CBDC) says that
private companies (i.e. Facebook’s Diem) stepping in to push deeper into the digital currency
space has made it incumbent on the Fed, Congress, and lawmakers to move even more swiftly.
o This paper supports the notion that Mark Zuckerberg’s China comment during his testimony to
the House Financial Services Committee on October 23, 2019 and China’s piloting a digital yuan
in February 2021 forced the Fed to take the CBDC phenomenon more seriously; on that note, Fed
Chair Jerome Powell called CBDC "a very high priority project" for the Fed. "We are looking
carefully — very carefully — at the question of whether we should issue a digital dollar."59
56 https://time.com/6099105/us-china-digital-currency-central-bank/
57 https://www.finextra.com/newsarticle/38200/bank-of-england-lays-down-regulatory-expectations-for-stablecoins
58 Lael argues that the U.S. greatly differs from China in terms of decisions taken by respective central authorities. In China,
the Communist Party of China (CPC) decides for everything including issuing a CBDC whereas in the U.S. there is no central
authority with direct oversight. In addition to the Fed, the following government branches take part in the decision and
the development of a central bank-backed digital currency; Office of the Comptroller of the Currency, the Securities and
Exchange Commission, the Federal Trade Commission, the Consumer Financial Protection Bureau, the Federal Deposit
Insurance Corporation, Office of Thrift Supervision, Financial Stability Oversight Council, Federal Financial Institutions
Examination Council and the Office of Financial Research https://www.brookings.edu/blog/techtank/2019/12/13/the-
current-landscape-of-central-bank-digital-currencies/
59 https://www.richmondfed.org/publications/research/economic_brief/2021/eb_21-10
31
o Paper money (i.e. the Federal Reserve Notes), a liability of the central bank, is the only direct link
between the general public and the Fed, but this connection is bypassed by the Fed via retail
intermediation provided mainly by commercial banks. The Fed officials emphasize that the Fed’s
wholesale (reserves) operation through a handful of qualifying financial institutions is already
fully digitized, similar to a CBDC. A chorus of economists including Romero et al (2021) asserts
that in the long run the U.S. might benefit from issuing a digital dollar (USDC); as such, cost savings
(i.e. engraving, printing, and counterfeit measures are projected to cost over $1 billion in 2021);
effective and timely monetary policy (availability of data at all times); doable negative Fed fund
rate; improved financial stability resulting from tamed inflation; efficient payments system
(faster, reliable, and minimal or no cost); and enhanced competition to fuel growth.60
3.0 Discussion and Concluding Remarks
A central bank (the authority responsible for achieving three important goals, i.e. financial, monetary
and economic stability) controls and manages a country’s money stock and credit via a contractionary
(unprinting money and higher fund rate) or an expansive (quantitative easing and lower fund rate)
monetary stance. To do this, a central bank uses all tools available in its arsenal, Bordo (2007) says “a
central bank uses its tools of monetary policy – open market operations, discount window lending,
changes in reserve requirements – to affect short-term interest rates and the monetary base
(currency held by the public plus bank reserves) in order to achieve important policy goals.” Crockett
(1997) argues that monetary and financial stability are the two integral components of a normal-
functioning financial system domestically and globally, Borio (2003) calls it “twin stability”.
Prior to the Great Depression of the 1930s, the Fed’s misguided/unjustified tight-money policy errors
in the late 1920s caused a substantial drop in the money stock and the ensuing severe contraction,
led to the 1929 stock market crash, recession, and inevitably the Great Depression. Many economists
believe that the Fed’s monetary tightening amid deflationary environment was unwarranted since
the macroeconomic conditions of the era had not awaken subdued inflation (e.g. Bernanke, 2004;
Friedman & Schwartz, 1963). Epstein and Ferguson (1984), in defense of the Fed’s tight-money policy
action, claim that the Fed’s main objective was to curtail speculation on Wall Street in order to avoid
stock market crash, but the Fed gravely failed and left the economy debilitated.
Throughout history but especially in the aftermath of a high-magnitude financial shock, central banks’
policy errors (the Fed’s in particular) get bombarded with criticism, this is often followed by a major
60 https://www.richmondfed.org/publications/research/economic_brief/2021/eb_21-10
32
public outcry and a series of structural changes61 to restore confidence. The Former Fed Chairman
Allen Greenspan (1998) in his testimony to the U.S. Congress on January 26 warned that “…significant
mistakes in macroeconomic policy also reverberate around the world at a prodigious pace’’. The Asian
crisis of 1997-98 along with the dot.com (2001-02) and the 2008 global financial crises may have
been the inevitable outcome of such policies’ adverse effects. A chorus of economists argue that the
Fed’s prolonged accommodative monetary policy stance resulted in dollar glut in the new millennium
(Bernanke, 2005), inducing banks to expand credit into a lot riskier mortgage segment called the sub-
prime, some lenders even engaged in predatory lending. These factors and more caused the outbreak
of the 2008 global financial crisis which was a near financial meltdown in the U.S., engulfing adjacent
countries (i.e. contagion), and spreading to Europe as a sovereign debt crisis in 2009-12 (for a full
discussion, see Acharya et al., 2014; Ardagna & Caselli, 2014; Bellucci et al., 2012; Bulmer, 2014).
Since the collapse of the Bretton Woods system of fixed exchange rates in 1971 (and President Nixon’s
decision to cut the dollar’s link to gold), there have been many efforts to kill off, deflate, or end the
dollar’s hegemony, but this is easier said in theory than done in reality. The U.S. dollar’s hegemonic
nature is solidified by other supporting elements of American supremacy such as economic power
(i.e. the largest economy in the world with over $23 trillion), technological power (i.e. the world’s
leading top trillion-dollar companies are U.S. origin, see Table 9), military power (i.e. most advanced),
and petrodollar (oil is priced in USD, other commodities such as gold, Bitcoin, and diamond are also
priced in dollar). The US’ abuse of sanction power in recent years together with the fast rise of Chinese
economy (i.e. as of 2014, China passed the US as the largest economy in GDP-PPP - purchasing power
parity), some wishful folks have actually begun to believe that the dollar’s days are numbered.
Table 9: The world’s largest companies in 2022

Rank Company Country Market Capitalization 2022
1. Apple United States $2.51 trillion
2. Microsoft United States $2.27 trillion
3. Alphabet (Google) United States $1.94 trillion
4. Saudi Aramco Saudi Arabia $1.89 trillion
5. Amazon United States $1.76 trillion
β Bitcoin (as of November 10, 2021) Unknown $1.26 trillion
6. Facebook United States $1.07 trillion
7. Tesla United States $737 billion
8. Berkshire Hathaway United States $647 billion
9. Taiwan Semiconductor Manufacturing Industry (TSMC) Taiwan $617 billion
10. Tencent China $609 billion
Source: https://www.analyticssteps.com/blogs/10-worlds-largest-trillion-dollar-companies-2022
61 The Fed’s failure to prevent the Great Depression of the 1930s led to the passage of the Glass-Steagall Act also known as
the Banking Act of 1933 (as a reactionary response to the public outcry, Senator Carter Glass and Representative Henry
Steagall drafted the Act) which barred U.S. commercial banks from investment banking activities (see Crawford, 2011;
Lardner, 2009; Mester, 1996). The dollar was devalued in 1934 as a defense by President Roosevelt to turn the economic
tide, the value of dollar to gold changed from $20.67/oz to $35/0z.
33
Money’s evolution into cryptocurrency has occurred in three waves; the first wave of research began
in early 1980s with Chaum’s proposal for “untraceable payments” (Chaum, 1982). The second wave
consisting of variations and extensions of the antecedent research was in the 1990s that proved to be
a decade for groundbreaking events that took a leap of faith that the Internet would make the dream
of electronic cash a reality (for more details, see Woodford, 2000; Camenisch et al., 2005; Okamoto &
Ohta, 1992). Various applications such as combating email spam, internet-based payment system, and
minting digital coins never saw a widespread deployment. Skeptic risk-averse investors caused the
notable attempts by DigiCash and Peppercoin to fail; DigiCash (1990) filed for bankruptcy in 1998. In
the late 1990s, two attempts at creating a decentralized digital currency emerged; “b-money”62 by
Wei Dai (Dai, 1998) and Bitgold by blockchain pioneer Nick Szabo63; e-gold (established in 1996) with
several million users was shut down by the US government in 2008 citing legal issues.
Since the Asian crisis of late 1990s, contemporaneous crises in the new millennium have collectively
cost over $30 trillion to economies of advanced nations. As the recurrence of financial crises has kept
rattling markets worldwide, a search for a viable alternative to the U.S. dollar has gained momentum.
The third wave was induced by the farfetched implications of the unprecedented 2008 global credit
crisis, providing a perfect ground for a mysterious user by the alias Satoshi Nakamoto (a pseudonym)
to launch64 Bitcoin in January 2009 as a successful cryptocurrency65. However, the U.S. government
has raged a war on cryptocurrencies (and stablecoins); accordingly, former President Donald Trump
slammed Bitcoin and Facebook’s Libra (now Diem) by tweeting “I am not a fan of Bitcoin and other
cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air”.
Table 10: Top cryptocurrencies by market capitalization
Rank Symbol Name Price Circulating Supply Market Cap
1. Bitcoin (BTC) $66,767.78 18,869,031 $1,257,160,465,625
2. Ethereum (ETH) $4,714.50 118,282,342 $556,688,294,121
3. Binance (BNB) $648.36 166,801,148 $107,731,613,684
4. Cardano (ADA) $2.23 33,284,285,828 $74,198,827,077
5. Tether (USDT) $1.00 73,809,061,439 $73,802,162,021
Source: https://coinmarketcap.com/
62 http://www.weidai.com/bmoney.txt
63 Szabo (2005), “Bit Gold” available at: http://unenumerated.blogspot.rs/2005/12/bit-gold.html
64 Satoshi Nakamoto (a pseudonym, his identity is unknown) supposedly worked about two years for writing the codes of
Bitcoin. He kicked off Bitcoin project on November 9, 2008. On January 3, 2009, he created the genesis block (first block);
a week later on January 9, 2009, Bitcoin v0.1 was released. As a symbolic first peer-to-peer Bitcoin transfer took place on
January 12, 2009 when Satoshi sent 10 BTC to a computer programmer by the name of Hal Finley.
65 Also referred to as electronic money, digital money, digital cash, digital coin, virtual money, and crypto-currency.
34
Although paper-based payment systems, intermediated by banks (i.e. cash and checks), still continue
to play important roles, the digitalization of money (i.e. cryptocurrencies, stablecoins, and CBDCs) not
only is inevitable, but CBDCs could potentially dethrone cash’s centuries-long reign as most central
banks around the world are either conducting research or considering issuance of a CBDC (Jakobsen,
2018; Bech et al., 2017; CPMI-MC, 2018). Barontini and Holden (2019) have observed that different
central banks are moving at substantially varied speeds; while China as a major economy is at the
forefront of paper money’s transition into a digital form, the U.S. and the UK are proceeding rather
cautiously; on that note, Philadelphia Federal Reserve President Patrick Harker contends that the U.S.
should rush to issue a CBDC just because China is rolling out its digital yuan.
Central banks worldwide have different motivations and intents for conducting research on CBDCs
(i.e. in advanced economies and EMEs, while payment safety ranks first in the order of importance for
both general-purpose and wholesale CBDCs, financial inclusion ranks lower in both categories), but
only less than a handful of countries have real intentions to issue a CBDC before 2025. About three
quarters of central banks that took part in a BIS survey have confirmed their engagement in CBDC
research; furthermore, more than half of the respondents have indicated that their theoretical and
conceptual research work cover both general-purpose and wholesale CBDCs based on blockchain
using cryptography and distributed ledger technology (e.g. Barontini & Holden, 2019).
In spite of various projections that physical cash will no longer be the main means of payment in near
future, nonetheless central banks of advanced economies still insist to take a cautious approach; in
fact, the most dominant Fed and the Bank of England argue that a CBDC should only be launched when
benefits (i.e. reduced transaction cost, better track of money movement, and tighter control of tax
evasion and financial crime) outweigh costs, in other words, a CBDC should be “minimally invasive”
(Auer & Böhme, 2021). Most central banks emphasize that a CBDC design should replicate properties
of the current two-tier monetary system (wholesale and retail) which is based on physical cash and
private intermediation, but they also caution that CBDC research is in early stages with a wide variety
of unanswered technological and design challenges (i.e. central banks lack technological expertise) as
well as potential risks such as run on deposits, anonymity (data privacy), and elimination of private
commercial bank (i.e. trusted third party) intermediation involving deposits and loan generation,
payments, and ATMs (the need for ATMs has decreased significantly since the outbreak of COVID-19).
Notwithstanding concerns, challenges and potential risks, money’s inevitable evolution into digital
form (account based and token based) will continue unabated; it is not a question of if, but when.
35
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Say Good Bye to Physical Cash and Welcome to Central Bank Digital Currency 

Dr. John Taskinsoy a

to 2016), and Mastercard (since 2016).

Source: 2020 Nilson Report; https://nilsonreport.com/publication_chart_and_graphs_archive.php

Source: Statista, https://www.statista.com/chart/20618/cashless-payments-across-the-world/

Source: Statista, https://www.statista.com/chart/19868/share-of-cash-payments-in-different-countries/

Source: eMarketer.com, https://www.oberlo.com/statistics/ecommerce-sales-by-country

Source: Capgemini, https://worldpaymentsreport.com/cash-usage-analysis/

 104 million consumers have cards in a digital format.

15 For more details and stats, check out PYMNTS.com at https://www.pymnts.com/study/

16 To track the development status of various CBDC initiatives, see https://www.atlanticcouncil.org/cbdctracker/

Source: Business Insider Intelligence17

Source: Author; Statista; https://www.statista.com/statistics/377382/bitcoin-market-capitalization/

Source: Visual Capitalist, https://www.visualcapitalist.com/2000-years-economic-history-one-chart/

Table 1: GDP at PPP rankings

Source: PwC21; * Projected

Source: Global Findex database; Demirgüç-Kunt et al (2018)

Table 2: U.S. household financial inclusion status by year

Number of Banked, underbanked

Table 3: Banking crises in countries on gold standard

Source: Weber (2015); Reinhart and Rogoff (2009a, b);

Table 4: Average and standard deviation of annual inflation

Belgium 0.06 -1.87 1.67 3.79

Source: Weber (2015)

Table 5: Central bank rankings by total assets

Source: Auer and Böhme (2021)

Table 6: Countries either launched or in the process of launching CBDC

Bahamas Sand Dollar to be rolled out by the end of 2019.

Benefits of central bank-backed digital currencies (CBDCs)

Source: The Federal Reserve, https://www.federalreserve.gov/paymentsystems/coin_data.htm

Source: Demirgüç-Kunt et al (2018)

Source: Federal Insurance Deposit Corporation – FDIC (2017)

Table 7: Comparative analysis between money and deforestation

Source: Author, Taskinsoy (2019s) is updated, Taskinsoy (2021g)

Table 8: Market cap of fiat currencies in BTC (2021)

Rank Flag Currency Market Cap Circulating Supply Max Supply

(3:15 AM – Jul 12, 2019); https://www.foxbusiness.com/markets/bitcoin-price-tumbles-trumps-criticism

3.0 Discussion and Concluding Remarks

Table 9: The world’s largest companies in 2022

Table 10: Top cryptocurrencies by market capitalization

Rank Symbol Name Price Circulating Supply Market Cap

1. Bitcoin (BTC) $66,767.78 18,869,031 $1,257,160,465,625

2. Ethereum (ETH) $4,714.50 118,282,342 $556,688,294,121

3. Binance (BNB) $648.36 166,801,148 $107,731,613,684

4. Cardano (ADA) $2.23 33,284,285,828 $74,198,827,077

5. Tether (USDT) $1.00 73,809,061,439 $73,802,162,021

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