George Selgin makes a pitch for the US Fed to facilitate the issuance of synthetic central bank digital currency (sCBDC) as opposed to the intermediated variant (iCBDC) that its recent consultative paper seems to advocate. In the synthetic approach, payment service providers (PSPs) offer digital currency (DC) that is fully backed by reserves held and ring-fenced from the PSPs' other creditors in Fed Master Accounts. In the intermediated approach, the Fed makes CBDC available to the PSPs who would act as the Fed's agents (i.e. as custodians and trustees of end user CBDC holdings).
Selgin notes that sCBDC will better promote DC diversity and innovation, because it allows for numerous, entirely distinct retail DCs, whereas iCBDC provides for a single DC only, albeit one offered at and administered by numerous private-sector firms. An iCBDC is likely to be a fairly, if not fully, homogeneous digital product, instead of a set of such products with different features designed to serve the needs of different clients. However, the Fed has so far been reluctant to do open up its Master Accounts to nonbanks, which would be required to get the maximum sCBDC benefits.
The new Peoples Bank of China (PBOC) e-CNY app has scored a 4.4 out of 5 in China's Apple App Store, and Richard Turrin, in his review, concurs. If the e-CNY is going to be accepted it's got to bring something to the table in addition to what's offered by Alipay and WeChat Pay, and Richard runs through the major new features that will be important enough that they’ll get some to change. These include: -Unlimited spending limits for e-CNY wallets that fulfill the highest level of know-your-customer (KYC), versus Alipay personal accounts that top out around RMB 20,000 (about $3,000). -The ability to set spending limits not just on the entire account but on all of the sub-wallets, a money management feature that the other payment platforms don’t have. -Payments of less than RMB 2000 ($300) are anonymous! There is no equivalent for the other payment platforms or even western credit cards.
