Synthetic central bank digital currency (sCBDC) — Public private CBDC collaboration

Authors: Anna Maria Bracio, Jonas Gross

Central bank digital currencies (CBDCs) more and more approach reality. One special form of a CBDC is a synthetic CBDC (sCBDC). In such a setup, the CBDC system is not directly managed by the central bank, but a wide range of tasks is outsourced to private companies, such as e-money institutes. In the case of such a private public partnership, financial institutions fully back e-money with riskless central bank money. This results in a synthetic CBDC, a digital form of (e-)money that is fully backed by riskless central bank money. In this article, we explain and discuss such an sCBDC system in the context of the Euro area and compare it to a “classical” CBDC system.

Introduction

Today, central bank digital currencies (CBDCs) are discussed all over the world. According to a study by the Bank for International Settlements (BIS), 80% of worldwide central banks currently analyze the issuance of a CBDC (Boar, Holden, Wadsworth, 2020). One special CBDC form is so-called synthetic CBDCs (sCBDCs) as a special form of public private collaboration. An advantage of an sCBDC compared to a CBDC is that in such an sCBDC setup the central bank has fewer responsibilities as in a CBDC system, therefore, needing fewer resources and being able to focus on its core competencies.

The term sCBDC was introduced by Tobias Adrian and Tommaso Mancini-Griffoli from the…