Why a decision on UK CBDC comes down to robust use-cases

While I have huge respect for Andy and what he's achieved, on this occasion I beg to differ.  I don't think it helps the CBDC discussion very much to think about it in terms of use cases. there are both "negative" and "positive" reasons for this:

1. at least in a developed economy, any single use case you come up with can be met without the need for a complete disruption of the entire existing system - which is what CBDC would represent;

2.from long experieince, it seems that any systemic reform cannot rely for the business case on one or a few use cases.  This makes sense when you think about it: by their nature, systemic reforms are focused on future use cases which are hard to envisage simply because they aren't possible right now. If you pick a few, its too easy to convince yourself the thing can be dome more easily another way.  Once the decision has been made to implement a systemic reform, the choice of implementation path can and should be guided by low hanging fruit in terms of use cases.  But not the "whether to do it" question;

3. In fact there is a policy imperative that has little to do with use cases as such and much more to do with the central bank retaining effective microeconimic levers over the financial system for which they are responsible.  As cash disappears, the central bank loses the ability to directly infuence the money flow.  No central bank can feel comfortable letting this happen.

4.  Depending on design choices, I think central banks are grossly underestimating the challenge of bringing in a widely traded retail CBDC.  And if you design out the challenges, you trade off the scope and utility of the CBDC.  There's no doubt genuine innovation opportunities would arise from a well-designed retail CBDC.  But the network effects working against wide uptake are enormous.  I have not yet heard really strong explanation for how those effects are to be overcome.

None of this should be read as a polemic against CBDCs - in fact I'm pretty sure they are inevitable. But unless we do the design realyl well, and have a really strong, patient implementation plan, we risk wasting a lot of money. 

Hi Chris...Firstly, thanks for your kind words, they are much appreciated.

I think you are agreeing with me though in many aspects??? Many of your points do actually look at the use case behind spending the time to implement a CBDC. I agree, there is is zero need if you are simply looking to re-engineer the wheel, and, there are many many unknowns when you look at a CBDC in a use case that that we are familiar with (retail CBDC etc). 

My point is, there are challenges we have with FIAT that a CBDC could step in and solve, this is a very specific use case behind the adoption of a CBDC. In such cases, you are not changing macro or micro-economic controls, rather you may well be enhancing them / introductiong something new. Hopefully I can share more shortly as we look to publish some of this thinking on CBDCs shortly.....  

Thanks Andy. look forward to the paper - it looks like BIS has just published something too.