Overview and Concept

National monetary systems bundled currency, issuance, regulated intermediaries, reserves, settlement, distribution, regulation and central-bank support. Digital money is unbundling these functions: a claim may be denominated in one currency, issued elsewhere, backed in a third location, distributed through a global wallet and settled on a token network.

Stablecoins are the immediate catalyst, but the emerging architecture is broader. Tokenised deposits, e-money, retail or wholesale CBDC, tokenised central-bank money and new cross-border payment arrangements may coexist and interoperate — or fragment into separate pools of liquidity, data and trust.

The opportunity is substantial: faster cross-border payments, 24/7 settlement, more contestable distribution, programmable transactions and a settlement layer for tokenised finance. The risk is that innovation in one layer weakens the connections that keep money interchangeable at par and credible in stress.

The policy challenge is therefore not to preserve today’s bundle unchanged or select one winning instrument. It is to decide which functions can safely become modular, which must remain anchored in central-bank money and public oversight, and how public and private forms of money should coexist.

The choices are interdependent: settlement access shapes singleness; interoperability shapes competition; and wallet, data and cross-border rules shape visibility, substitution risk and regulatory arbitrage. The operating model matters as much as the rulebook. Authorities need senior ownership, a target architecture, a common risk and data model, stage gates from experiment to scale and joint crisis playbooks. Domestic and cross-border arrangements must allocate oversight, data access and backstop responsibilities explicitly.

 

Key Design Choices

1. Define the role and perimeter: determine which forms of digital money should serve retail, wholesale and cross-border use cases; which currencies, users and activities are permitted; and how foreign arrangements are recognised.

2. Design the claim and issuer regime: clarify the legal nature of the claim, eligible issuers, reserve, capital and liquidity requirements, redemption at par, safeguarding and treatment in insolvency.

3. Preserve the public monetary anchor: determine access to central-bank settlement, the role of CBDC or tokenised central-bank money, and interoperability and finality requirements that preserve the singleness of money across ledgers and payment rails.

4. Govern distribution, data and integrity: set rules for wallets, identity, consumer protection, privacy, financial-crime controls, operational resilience, custody and critical providers.

5. Manage system effects and stress: assess bank funding, transmission, currency substitution and capital flows, and establish liquidity, resolution, payment-continuity and cross-border crisis arrangements.

 

Guiding Questions

• What target monetary architecture should authorities aim for, and which outcomes should determine the role of each form of digital money?
• How should central-bank money, tokenised deposits and stablecoins interact to preserve singleness, competition and innovation?
• Which issuer, reserve, redemption, settlement and interoperability requirements are non-negotiable, and where can models differ?
• How should supervision, financial integrity, data governance and crisis management work across wallets, providers and borders?
• What are the implications for bank funding, transmission, digital dollarisation and capital flows, and what must be decided in the next 12–24 months?