Is the integrated CBDC the third type of digital currency in the central bank?

In the last week, overseas research reports and news about the central bank's digital currency CBDC have been influential:

date	title	Author
December 10	CBDC (CBDC – in a whirlpool of discussion	Central bank of lithuania
December 12	Central Bank Digital Currencies: 4 Questions and Answers	International Monetary Fund
December 13	The current landscape of central bank digital currencies	Brookings Institution
December 13	Riksbank develops an e-krona in a test environment	Swedish central bank
December 17	Exploring anonymity in digital cash	European Central Bank

The Brookings Institution article is nothing more than a summary of the recent views of the CBDC. The IMF's "Four Questions and Four Answers" is not very new. It mainly states its position and intends to support the exploration of CBDC in three ways: report on the discussion of the CBDC strategy, convene relevant parties to discuss the plan, and help countries formulate the CBDC. Policy, which mentions a concept: comprehensive CBDC (synthetic CBDC ).

        The concept of integrated CBDC is also discussed in the Lithuanian central bank report:

"Comprehensive CBDC does not fall into the category of wholesale and retail CBDC. In fact, it means that private banks or payment institutions issue accounts or tokens that are presumed to be backed by reserves, and receive a sufficient and unlimited supply of bank reserves from the central bank."

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Compared with retail and wholesale types of CBDC, what is the comprehensive CBDC?

The concept was proposed by two IMF researchers Tobias Adrian Tommaso and Mancini-Griffoli in a report published in July 2019: The rise of digital money.

They believe that if the central bank issues digital currencies directly, it will put itself at a disadvantage:

"(If) the central bank is the main CBDC operator, it is responsible for many steps: performing customer due diligence, providing or reviewing wallets, developing, selecting basic technologies, providing settlement platforms, managing customer data, monitoring transactions, processing customer requests, Complaints and issues, etc. Each measure increases the risk of failures and cyber attacks, brings huge costs, and puts the reputation of the central bank at risk. "

They proposed that in the solution of the CBDC, it is better to adopt a approach of public-private partnership (one approach established in a public-private partnership). Undertake other functions under supervision. This type of CBDC has lower cost and lower risk, and can maintain the advantages of the central bank in providing trust and efficiency, and the advantages of the private sector in innovation and customer interaction.

In early 2017, Jerome Powell, then a member of the Fed and today's chairman of the Fed, expressed similar thoughts at a conference on blockchain discussions:

"While the central bank actively considers the issue of digital currencies, it also needs to consider the payment system and other policy issues with due diligence …. It should also consider whether the private sector can generally meet the same needs …. (Private sector) More competitive. The issuance of digital currencies by the central bank will compete with these innovative private sector products, which will inhibit innovation in the long run. " Speech at the future conference)

From the above, the comprehensive CBDC is not the third CBDC type that is tied with retail and wholesale CBDCs , but is mainly used for retail CBDC issuance and operation. This model is selected to avoid the central bank's supervision. At the same time, combining referees and athletes, they also have to bear the burden of excessive business operations, while also making full use of the operating resources, innovative spirit and ability to obtain customers of private institutions.

A recent IBM report also mentioned this model, called public-private partnerships . Of the 23 central banks they surveyed, 64% believe that the intermediary role of the private sector is essential to ensure the successful issuance of CBDC. They purchase CBDC from the central bank and deliver it to consumers in need through the Internet platform, while also providing Wallet service, responsible for customer due diligence, management of customer data, monitoring transactions, handling customer complaints, etc. (IBM & OMFIF, retail CBDC, next payment frontier)

Fan Yifei, Vice President of the People ’s Bank of China (2016) pointed out that there are two modes of operation of legal digital currency: one is to issue digital currency directly to the public by the central bank; the other is to follow the traditional “central bank-commercial bank” dual model . This corresponds to single-level operations and two-level operations. According to the information released so far, China's DC / EP adopts a two-tier operation model , in which the central bank issues central bank digital currency to designated institutions, and these designated institutions issue digital currencies to their customers or the public. . This two-tier model is a public-private partnership to issue CBDC .

Choosing a two-tier operation will help improve system operation efficiency, provide customers with customized services, reduce the central bank's operational management pressure and commercialization tendency, use existing resources of commercial institutions, decentralize and resolve risks, and avoid financial disintermediation .

However, some small, dollarized island nations do not think so. They believe that CBDC should be issued directly by the central bank, and the intermediary role of the private sector is not necessary. And countries that believe that the private sector should be involved as the intermediary of CBDC operations, also believe that there must be a new regulatory framework to strengthen the management of participating institutions.

It seems that there is no ready-made model for how to choose the model of CBDC. It all depends on the situation of each country or region.

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