Commentary

Central bank digital currencies (CBDC) are being considered in many countries - as a novel form of digital public money issued and backed by the state. One of the most extensive and advanced of these schemes is China’s e-CNY or ‘digital yuan’ pilot. It is also one of the most discussed. And yet it is perhaps one of the most mysterious, owing to the reticence of Chinese officials, the complexity of the pilot, and the wide variety of options available to Chinese authorities for future development of the e-CNY and the broader digital asset ecosystem within China. This note takes stock of the current status of the e CNY, emphasizing its core infrastructure, existing use cases and the ‘managed anonymity’ model. Looking forward, how the e-CNY may fit into a digital financial system, how it may underpin non-financial and government activities, and how it may promote the internationalization of the renminibi is also discussed. We argue that external observers may be somewhat exaggerating the individual importance of the e-CNY scheme to the Chinese government. Ultimately, the e-CNY should be regarded as only one piece of a broader, coordinated drive to modernize the Chinese economy and how the government interacts with it.

With advances in tokenization, increased regulatory clarity in important jurisdictions, and further enhancements in blockchain technology, the coming years promise exciting opportunities for stablecoins. However, digital assets in general, and stablecoins in particular, have experienced false dawns before. Is this time different? Perhaps a better question is to ask: what must be done to ensure that this time is different? What can be done to accelerate the hoped-for progress and to ensure that it is sustainable? This paper is intended to start a conversation on what sort of consistent approaches to stablecoin design - and perhaps technical standards - might help promote fungibility, efficiency and safety among stables.

A short and non-technical note critiquing some elements of the Bank of England's approach to stablecoins - with a particular focus on the problematic aspects of their (over)emphasis of the importance of "singleness of money".

A note discussing the concept of singleness of money, with particular emphasis on its relevance for stablecoins and regulation of payments and money issuance.

This note summarizes results from questions on the Digital Pound, included within surveys run by the Confederation of British Industry in April 2024. The key finding is how little knowledge of, or preparation for, the Digital Pound there is among the firms that responded.

The Bank of England launched a consultation on systemic stablecoins in 2023. The consultation was open to all, and I selected a subset of the questions they posed, where I felt a) I knew enough to comment and b) the Bank may have gone somewhat astray. Naturally, there are enormous uncertainties surrounding stablecoin and how they should be regulated, so reasonable people can disagree in this area. However, I felt the Bank was in some ways being too risk averse in the set of backing models they were considering - with possibly severe implications for the incentives for the private sector to innovate and improve stablecoin (and digital custody) technology. I also felt they were too reluctant to consider reasonable ways in which they could enhance the publicly provided infrastructure, such as in providing liquidity facilities. 

A thorough survey and analysis of all (I think) domestic wholesale CBDC pilots as of the end of 2022.

What happens to banks when they unexpectedly lose money? Do they shrink? We find they don't so much shrink, as move their portfolio composition towards less risky (or lower risk-weighted) assets.

A jote from back when people were trying to figure out what constituted a good or a bad monthly jobs growth number for the US economy, during a period when movements in labor force participation was making that somewhat tricky...

Investors have a hard time accounting for uncertainty when calculating how much risk they are willing to bear. They can use economic models to project future earnings, but many models are misspecified along important dimensions. One method investors appear to use to protect against particularly damaging errors in their model is by projecting worst-case scenarios. The responses to such pessimistic predictions provide insights that can explain many of the puzzles about asset prices.

One of my favorite pieces of work. People (including policymakers who should know better) constantly suggest that price inflation will inevitably reflect recent movements in wage inflation and that wage inflation is somehow the be all and end all for forecasting price inflation. Neither is (apparently) correct, at least for the US economy...

Animal spirits are often suggested as a cause of business cycles, but they are very difficult to define. Recent research proposes a novel explanation based on the changing level of risk over time and people’s uncertainty about how the world works. The interaction of these two can lead to significant business cycle fluctuations in response to spikes in volatility. This finding gives researchers an alternative to irrational behavior as an explanation for why swings in consumer sentiment appear to drive the business cycle.

While a fellow at the National Institute of Economic and Social Research I became involved with an interesting and worthwhile project organized under the auspices of Llewellyn Consulting and Gatehouse Advisory Partners. This entailed the publication of a collection of brief essays, on important areas of policy that require re-thinking in the coming years, partly, but not exclusively motivated by Brexit. Each chapter was written by an eminent subject expert and received coverage in The Guardian, The Telegraph and The Sunday Times.