Money and Payments Infrastructure: understanding the plumbing

Dr Rhys Bidder
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Dr Rhys Bidder: Central Bank of Ireland Research Affiliate

Quarterly Bulletin Articles, 2026, 1-52

Abstract: This article provides a comprehensive analysis of the infrastructure that underpins both traditional and emerging payment systems. It establishes a consistent framework for comparing different modes of settlement, distinguishing between public money (cash and reserves) and private money (bank deposits and stablecoins). The paper begins by describing traditional European infrastructure, focusing on the TARGET framework and the two-tier monetary model, where commercial bank deposits expand upon central bank reserves. It details how these traditional systems—including card networks and correspondent banking—ultimately rely on central bank money for final settlement. The paper then explores the disruption caused by blockchain technology and stablecoins, highlighting a fundamental difference: while traditional payments require coordinated interbank adjustments in reserves, stablecoins operate as bearer assets that settle directly on-chain without immediate recourse to central bank systems. Finally, the paper discusses the interaction of these frameworks and the modernization of the two-tier model through tokenized deposits and central bankrun DLT initiatives.

Date: 2026-03
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Persistent link: https://EconPapers.repec.org/RePEc:cbi:qtbart:y:2026:m:03:p:1-52

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