The Future of Money: An Analysis of the Options for Central Banks in the Digital Era

The research in this thesis focuses on the current outlook for the future of money, what options are available and how these can be evaluated. Regarding the current options for central banks, the research revealed that two relatively similar options are to choose from; a Central Bank Issued Digital Currency (CBDC), essentially a digital version of cash, and a modern, robust Instant Payment System (IPS), for most countries upgrading our payments infrastructure. Both come with different advantages, while CBDCs provide more potential stability as it allows ongoing access to central bank money, an IPS proves successful in its ability to utilise existing infrastructure, showing relatively high levels of acceptance in countries around the world. Significant challenges found during the research for CBDC or IPS issuance were that trust in government (or a similar issuing entity) must be high while simultaneously there being no existing and therefore competing robust instant payment system within the jurisdiction. These two challenges would lead to a lack of incentive to adopt a new system of payments for the average user and have other negative network effects. Furthermore, the research has shown that clarification if an IPS will indirectly be capable of providing the necessary stability to ensure the coherence of a domestic system, especially if cash is no longer used and there is no alternative access to central bank money. However, experts agreed that this scenario has never happened before to a large functioning economy in the modern area and is difficult to predict, with Sweden likely being the first to experience this effect first-hand. Finally, the research has shown that acceptance of any newly issued CBDC or IPS will only reach sustainable levels if the interface is easy to use by all, fulfils user needs, and the onboarding has been marketed well with all key stakeholders and retailers on board. This thesis proves to serve as guidance, with limitations and should contribute to the ongoing research about the future of money