Regading CBDCs:<p>There was a Bitcoin hostile article published by European Central Bank today. I was wondering why ECB even bothers to write about Bitcoin. Turned out, the author is a fan of CBDCs and taking cash away so that ECB could enforce negative interest rates.<p>> For example, Dyson and Hodgson (2016) argue that “if digital cash is used to completely replace physical cash, this could allow interest rates to be pushed below the zero-lower bound.” Rogoff (2016) develops this argument in detail. By allowing to overcome the zero-lower bound (“ZLB”) and therefore freeing negative interest rate policies (“NIRP”) of its current constraints, a world with only digital central bank money would allow for – according to this view - strong monetary stimulus in a sharp recession and/or financial crisis. This could not only avoid recession, unemployment, and/or deflation but also the need to take recourse to non-standard monetary policy measures which have more negative side effects than NIRP. Opponents of NIRP will obviously dislike this argument in favor of CBDC, and will thus see CBDC potentially as an instrument to overcome previous limitations of “financial repression” and “expropriation” of the saver.<p>> In sum: it seems that the remuneration of CBDC is per se neither necessary to clear a market, nor to control inflation, in analogy with the case of banknotes, which also cause none of these issues8. However, still, the ability to remunerate CBDC, in contrast to banknotes, is a privilege that has a number of advantages. It allows shifting the interest rate on CBDC in principle in parallel to monetary policy rates, such as to avoid that the relative attractiveness of CBDC relative to market- and central bank policy rates depends on the absolute level of interest rates, as it is the case for banknotes. Indeed, the fact that the remuneration of banknotes stands at zero regardless of whether short-term risk-free rates are at 10% or at -0.5% (as currently in the euro area) may be perceived as an anomaly, which becomes increasingly problematic when the zero lower bound is being approached or passed. Moreover, a negative remuneration of CBDC also allows addressing the possible danger of a run into CBDC in case of a systemic banking crisis (as also noted by Kumhof and Noone). As shown in section 4, in the 2008 banking-, and 2011/12 euro area debt crises, a run into banknotes played only a rather minor role, relative to the run from perceived weak to perceived strong banks – despite the fact that the remuneration of banknotes remained at zero, and that the level of short term risk free rates quickly approached this level after the Lehman default, reducing the opportunity costs of holding banknotes. Nevertheless, since a run into CBDC would be easier, it would be recomforting to have as extra tool the ability to impose negative rates on CBDC.<p>This kind of money tinkering sits at the opposite of the political spectrum of Bitcoin, regardless if you like Bitcoin or European Central Bank.<p><a href="https://deliverypdf.ssrn.com/delivery.php?ID=779068125074119107121086087000106028034002008002053038105115014071104010117125118124043110106115033100010094101127117121100070123000008015072068094118124088098084034079016009091073123109087026091015066127016024078126067092108068071067070006008067109&EXT=pdf&INDEX=TRUE" rel="nofollow">https://deliverypdf.ssrn.com/delivery.php?ID=779068125074119...</a>