CBDCs and the Law of Unintended Consequences

Whether you agree with Henry Ford, ‘History is bunk’, or George Santayana, ‘Those who don’t learn from history are doomed to repeat it’, a paper from the Department of Economic History at Uppsala University gives an interesting perspective on the risks of introducing a Central Bank Digital Currency (CBDC).¹ It looks back to when the Riksbank in Sweden decided to replace the then 28 existing unlimited liability commercial banks (ULBs) with central bank notes.

Role of a CBDC

The Bank for International Settlements (BIS), European Central Bank (ECB), Bank of England (BOE) and Riksbank have all made statements about what CBDC is and reasons to implement it. For example, in 2021 the BIS said a CBDC would be to give the public increased access to ‘the safest form of money – a claim on the central bank’.