For a Political Economy of Central Bank Digital Currency (REP)
In this 2024 Revue d’Economie Politique (REP) article, Christian Pfister applies a positive (political economy) rather than normative framework to retail central bank digital currency (rCBDC). He maps stakeholder incentives across governments, central banks, regulators, incumbent banks, and fintech firms, then tests whether stated policy rationales align with those incentives. He concludes that publicly foregrounded motives, like financial inclusion, payment system safety, monetary sovereignty, and privacy, are analytically weak or already reached in developed economies. The dominant but largely unstated drivers are fiscal, such as seigniorage maximization through balance-sheet expansion, permanent rollover of sovereign debt held as rCBDC backing, and reduced tax evasion. Setting rCBDC remuneration at zero, officially framed as “do no harm” to bank intermediation, simultaneously serves those seigniorage objectives while suppressing a monetary policy transmission channel that the academic literature broadly endorses. For institutional design, combining legal tender status with fee exemptions advantages rCBDC in ways that raise competitive-neutrality concerns and risk crowding out private innovation. In non-democratic settings, programmable money creates structural conditions for mass surveillance. [REP]
