Maarten van Oordt (Vrije Universiteit Amsterdam) – Best Before? Expiring Central Bank Digital Currency and Loss Recovery

An important feature of physical cash payments is their resilience due to their independence of electricity or network coverage. Many central banks are exploring issuing digital cash substitutes with similar offline payment functionality. Such substitutes could incorporate novel features, making them more desirable than physical cash. This paper considers automating personal loss recovery for offline digital currency balances through the introduction of an expiry date. Our results show this functionality could have a substantial positive impact on consumer demand for offline digital currency balances. We find an asymmetric impact on welfare of adjustments to the expiry date: small increases from the optimum cause little damage, but small decreases from the optimal expiry date can have a large negative impact. More information sharing between user devices and the central bank can improve loss recovery but has an ambiguous impact on social welfare.

Datum:
Friday, January 13, 2023 um 11:00 a. m.

Ort:
Oesterreichische Nationalbank
Otto-Wagner-Platz 3, 1090 Wien
and online via Webex