Digital Humanities, Social Science and Cultural Preservation
A Physical Store of Value for Digital Money as an Integral Stabilizing Part of the Digital Payment Network
Abstract
Andrei Lipkin
Today, there is nothing more important for any central bank digital payment network (central bank digital currencies, tokenized deposits, stablecoins, etc.) than ensuring the quantum stability of encryption algorithms and the creation of an infinitely autonomous payment instrument — a physical store of value for the digital money of this payment network.
While efforts t o develop post-quantum cryptography ( PQC) are already i nspiring c autious o ptimism, unfortunately, central banks are not yet even considering creating a physical store of value for their own digital currency.
Instead of creating a physical store of value that can address the physical challenges of implementing digital CBDCs, central banks are attempting to negate these challenges through overly restrictive cash policies.
Even more shocking is that central banks are willing not only to discredit the image of their future digital currencies, but also to significantly reduce their future potential by initially introducing draconian restrictions on their use, such as banning interest accrual or limiting the size of CBDC accounts – thereby seriously undermining public confidence in the new digital generation of central bank money.
The problem of instant liquidity outflow can be solved without daunting restrictions by introducing a “braking” mechanism for withdrawing funds from deposits exclusively through CBDC Cash. Cryptobanknotes will significantly slow down the outflow process itself, thanks to their inherent inertia.
Similarly, the inertia of trading operations carried out simultaneously by a large number of users of cryptobanknotes significantly affects the volatility of cryptocurrencies/stablecoins, as it reduces the likelihood of simultaneous sale/ purchase of significant volumes of digital currency.
And if digital currencies achieve such a significant stabilizing effect simply due to the inherent inertia of cryptobanknotes, then what a fantastic impact will the many innovative features emerging from the symbiosis of CBDC Cash and digital CBDC have on digital currency and the financial system as a whole?