Ecosystem Models for a Central Bank Digital Currency: Analysis Framework and Potential Models Staff discussion paper 2024-13 Youming Liu, Francisco Rivadeneyra, Edona Reshidi, Oleksandr Shcherbakov, André Stenzel This note analyzes different economic models of a central bank digital currency (CBDC) ecosystem where the central bank chooses different levels of market involvement and usage of policy levers. The analysis suggests that there are trade-offs between the costs to the central bank and its ability to achieve policy goals like universal access. Content Type(s): Staff research, Staff discussion papers JEL Code(s): E, E5, E58, E6, E61, L, L5 Research Theme(s): Money and payments, Digital assets and fintech, Payment and financial market infrastructures
Central Bank Digital Currency and Transmission of Monetary Policy Staff working paper 2024-27 Saroj Bhattarai, Mohammad Davoodalhosseini, Zhenning Zhao Using a general equilibrium model with nominal rigidities and financial frictions, we explore whether introducing a central bank digital currency (CBDC) affects the transmission of monetary policy, and how the effects depend on CBDC design features. We also study whether paying interest on central bank liabilities is contractionary or expansionary. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E3, E31, E4, E5, E58, G, G2, G21, G5, G51 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission, Money and payments, Digital assets and fintech
The Ecology of Automated Market Makers Staff discussion paper 2024-12 Annetta Ho, Cosmin Cazan, Andrew Schrumm This paper describes the ecology of automated market makers, which are the most popular decentralized exchange model for the pricing and trading of crypto assets within decentralized finance. Content Type(s): Staff research, Staff discussion papers JEL Code(s): G, G1, G2 Research Theme(s): Financial markets and funds management, Market functioning, Financial system, Financial stability and systemic risk, Financial system regulation and oversight, Money and payments, Digital assets and fintech
The Role of Public Money in the Digital Age Staff discussion paper 2024-11 Francisco Rivadeneyra, Scott Hendry, Alejandro García A well-functioning monetary system is characterized by public and private forms of money that exchange at par as value flows freely between them. A relevant retail public money—whether in the form of cash, a central bank digital currency or both—is a necessary component of such a monetary system. Content Type(s): Staff research, Staff discussion papers JEL Code(s): E, E4, E42, E5, E50, E58 Research Theme(s): Money and payments, Digital assets and fintech, Payment and financial market infrastructures, Retail payments
Untapped Potential: Mobile Device Ownership and Mobile Payments in Canada Staff working paper 2024-25 Marie-Hélène Felt, Angelika Welte, Katrina Talavera We present a two-stage model of mobile phone and mobile payment usage that controls for selectivity. This reveals unobserved factors that work against having a mobile phone and toward mobile paying. Therefore, people who are unable to acquire or choose not to own a mobile device might have unmet payment needs. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C3, C39, D, D1, D12, E, E4, E42 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Money and payments, Digital assets and fintech, Retail payments
Analysis of DeFi Oracles Staff discussion paper 2024-10 Xun Deng, Sidi Mohamed Beillahi, Cyrus Minwalla, Han Du, Andreas Veneris, Fan Long Oracles are constructs used in decentralized finance to price assets relative to each other. However, oracles contain defects that could lead to manipulation attacks. Such attacks exploit pricing models embedded within oracles to defraud creators and users. We automatically verify defects, which if mitigated, improves the security of digital currency. Content Type(s): Staff research, Staff discussion papers JEL Code(s): E, E4, E42, E5, E51, G, G1, G15, O, O3, O31 Research Theme(s): Financial system, Financial stability and systemic risk, Money and payments, Digital assets and fintech, Payment and financial market infrastructures
2023 Methods-of-Payment Survey Report: The Resilience of Cash Staff discussion paper 2024-8 Christopher Henry, Matthew Shimoda, Doina Rusu We present key results from the 2023 Methods-of-Payment Survey. Results show that measures of cash management and use have remained stable since 2020, and that Canadians increased their adoption of payment alternatives such as mobile apps in 2023. Content Type(s): Staff research, Staff discussion papers JEL Code(s): D, D8, D83, E, E4, E41 Research Theme(s): Money and payments, Cash and bank notes, Retail payments
Demand for Canadian Banknotes from International Travel: Indirect Evidence from the COVID-19 Pandemic Staff working paper 2024-23 Hongyu Xiao This study uses the COVID-19 travel restrictions to estimate foreign demand for Canadian banknotes. It reveals that international visitors accounted for about 10% of all $100 CAD notes in circulation pre-pandemic, with each visitor carrying an average of $165 in hundred-dollar bills. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E4, E41, E42, E5, E58, F, F2, F22 Research Theme(s): Money and payments, Cash and bank notes, Structural challenges, International trade, finance and competitiveness
The Role of Beliefs in Entering and Exiting the Bitcoin Market Staff working paper 2024-22 Daniela Balutel, Christopher Henry, Jorge Vásquez, Marcel Voia We develop a model that links investors’ decisions to enter or exit the Bitcoin market with their beliefs about the survival of Bitcoin. Empirical testing using Canadian data reveals that beliefs strongly influence both entries and exits, and this impact varies with time and ownership status. Content Type(s): Staff research, Staff working papers JEL Code(s): D, D8, D83, E, E4, E41, O, O3, O33 Research Theme(s): Financial system, Household and business credit, Models and tools, Econometric, statistical and computational methods, Money and payments, Digital assets and fintech
Digital Payments in Firm Networks: Theory of Adoption and Quantum Algorithm Staff working paper 2024-17 Sofia Priazhkina, Samuel Palmer, Pablo Martín-Ramiro, Román Orús, Samuel Mugel, Vladimir Skavysh We build a network formation game of firms with trade flows to study the adoption and usage of a new digital currency as an alternative to correspondent banking. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C6, C7, C71, D, D4, D8, D85, G, L, L2, L22 Research Theme(s): Models and tools, Economic models, Money and payments, Digital assets and fintech, Payment and financial market infrastructures