Clouds, chips or chains? The three ways to implement a digital dollar: FedPesa, FedDex or FedCoin

David G.W Birch
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David G.W Birch: Principal, 15Mb Ltd., UK

Journal of Payments Strategy & Systems, 2020, vol. 14, issue 4, 339-352

Abstract: This paper explores the ‘evolutionary tree’ of electronic cash using a series of case studies; presents a taxonomy to facilitate a discussion of the strategic options available for central bank digital currencies; and highlights the three practical alternatives for implementing such a currency: as balances maintained offline in tamper-resistant hardware (‘FedDex’); as balances maintained online in a database (‘FedPesa’); or as tokens managed by an online shared ledger (‘FedCoin’). The paper concludes with the observation that a FedCoin solution may offer the most opportunities for innovation and economic growth. The idea of some form of FedCoin as a platform not just for smart money but very smart money is appealing in the central bank context as a way to implement the population-scale electronic cash system required to deliver a national digital currency. This is important because the renewed focus of central banks on the potential for central bank digital currencies should highlight the potential for electronic cash as a platform for new opportunities and a new generation of financial services, not simply a more efficient means to implement domestic retail payments. There is some urgency to this, as the beta testing of a Chinese digital currency is already underway.

Keywords: digital currency; electronic cash; evolution; digital money (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:aza:jpss00:y:2020:v:14:i:4:p:339-352

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