Integrating Central Bank cryptocurrencies into the normal economy (Part 1 of N )*

Central bank cryptocurrencies (bis.org)
SEC.gov | Framework for “Investment Contract” Analysis of Digital Assets

This is the first part of a number of series being worked on, the above two documents run through Merlin, Co-Pilot and Chat GPT.X that I’ve taken on as “editorial assistants” to occasionally edit and revise in my free time. My goal is to demonstrate how artificial intelligence (and more precisely AGI) can complement and work as an exoskeleton technology for writers. The other goal is to write the topic of this story using a variety of AGI tools.

Prompt used in Microsoft Designer: the utility of artificial intelligence can complement and work as an exoskeleton technology for writers.

Getting back to the original title of this article, the following terms are used interchangeably in this documentation:

Central Bank Cryptocurrencies
Centralized Blockchain Economies
Digital Federal Dollars
Federal Cryptocurrencies
Federal Dollars
Federal Reserve Digital Currencies
Forms of Non-physical Federal Tokens
Regional Bank Federal Currencies

BACKGROUND

• Blockchain technology is showing signs not of a revolution against traditional finance; rather, a use case for traditional finance to adopt and lead the revolution for the benefit of all. There is a growing interest in whether central banks should issue their own versions as a result.
• This document describes the current taxonomy of money, distinguishing between retail and wholesale central bank cryptocurrencies (CBCCs) and comparing them with other forms of central bank money.
• Bitcoin, previously an obscure computer-programming curiosity, has gained widespread creditability and market value, leading to the emergence of numerous other inter-connected cryptocurrencies not only to the economy but to the social-economy as well. The underlying blockchain technology has attracted investment and is expected to transform traditional financial services.

Central banks are actively exploring or experimenting with distributed ledger technology (DLT), attracting considerable attention to the prospect of central bank cryptocurrencies. This feature seeks to provide clarity on the nature of central bank cryptocurrencies and their potential benefits, including redefining central bank authorities. (12/05/23)

Defining the Taxonomy of Money

By looking at the aforementioned “Two taxonomies of new forms of currency”, it breaks out as the following

Cryptocurrency, CPMI (2015)- aka “CPMI”

Not the liability of anyone (Blue Circle)
Commodity money
Crypto-currency

Electronic (Green Circle)
Bank Deposits
Crypto-currency

Cash (Yellow Circle (CPMI(2015)))
Commodity money
Crypto-currency

Central bank digital currency, Bjerg (2017)-aka “BJER”

Central-bank issued (Blue Circle)
Cash
Central bank digital currency

Electronic (Green Circle)
Bank account money
Central bank digital currency
Reserves

Universally Accessible (Red Circle (Bjerg (2017)))
Cash
Crypto-currency

The first step overlays these two taxonomies on top of each other, and consolidate their terms. Then we can inspect both as one taxonomy entity.

(1) CPMI/BJER “Blue Circle” (Not the liability of Anyone/Central Bank Issued)

Cash
Central bank digital currency
Commodity money
Crypto-currency

(2) CPMI/BJER “Green Circle”

Bank account money
Bank Deposits
Central bank digital currency
Crypto-currency
Reserves

(3) Cash (Yellow Circle (CPMI(2015))) & Universally Accessible (Red Circle (Bjerg (2017)))

Cash
Commodity money
Crypto-currency

Further still, we need to revise the last part i.e. “Yellow Circle/Red Circle” to make it consistent with the other two parts. We’ll name it “Universally Accessible (Red Circle)” as the name “Cash (Yellow Circle)” is repeated as a term in the entities’ property. I’m trying to be careful here because there is not really a 1:1 mapping between the physical meaning of “Cash” and its “Accessibility”. So Let’s redefine this as “Universally Acceptable”

(3) Universally Acceptable “Red Circle”

Cash
Commodity money
Crypto-currency

Now, we have the “Taxonomy Overlay” in 3 parts closely overlaid. Further, lets apply some notations to these 3 parts, as they will be used frequenly.

(1) CPMI/BJER “Blue Circle”

(2) CPMI/BJER “Green Circle”

(3) Universally Acceptable “Red Circle”

The (T)axonomy of money based on the following four key properties:

(A)ccessibility

(F)orm

(I)ssue

(T)ransfer

In a future issue, to be represented as {T}(A,F,I,T)

{T}(A,F,I,T) differentiates between two possible forms of CBCC: (1) a widely available, consumer-facing payment instrument and (2) a restricted-access, digital settlement token for wholesale payment applications.

{T}(A,F,I,T) offers two benefits. (1) For the consumer-facing kind, it suggests that the peer-to-peer element of DLT has the potential to provide anonymity features similar to those of cash but in digital form.

This taxonomy of money is based on four key properties which defines CBCCs as electronic forms of central bank money exchanged in a decentralized manner (this environment is identified as Decentralized Finance “DeFi”), differentiating them from other existing forms of electronic central bank money. The taxonomy distinguishes between widely available, consumer-facing payment instruments and restricted access digital settlement tokens for wholesale payment applications.