The internet and portable online devices have radically transformed the way we use and exchange information, and the way we exchange money. Money has been digitalised in many ways and we can now, for instance, transfer bank deposits electronically and pay with e-money. Today I will focus on one type of digital money – Central Bank Digital Currency, or Digital Base Money (DBM).
This is money that is characterised by two features: (1) like banknotes in circulation, DBM is a claim on the central bank; (2) in contrast to banknotes, it is digital. Of course, DBM already exists. Commercial banks and some other types of institution hold digital claims on central banks in the form of deposits.