After the credit crisis of 2009, prominent economists spoke out that the same thing would happen if the payment-only function, called narrow banking, was not separated from the banking industry.
The ATM and card-based financial system is inefficient and expensive to maintain, and those at the bottom of the world are still being pushed out of the mainstream payment system. Cashless society will eliminate cash carrying cars and thus reduce the carbon emission. If a country is committed to carbon neutral, that country should abolish cash. In some countries, the policy of distributing COVID-19 subsidies to all citizens, free of charge or at a low cost, can be implemented as soon as the law is passed, with the CBDC platform.
The CBDC is a generic term for the digitalization of legal tender. Together with the concept of a universal currency, called Bancor, which Lord Keynes proposed in the 1940s at the same time as the establishment of the World Bank and the IMF, we would have the strongest CBDC platform.
This is a futuristic platform for people who don’t want to spend cash from infectious disease viruses, or who have problems with card merchant fees and payment sites.
For CBDCs, the required 11 criteria are set out in the November 2018 IMF publication,
We are helping developing countries that are trying to catch up with Estonia with a functional system that includes not only the IMF’s standards, but also those of the BIS and those considered necessary by prominent financial and economic scholars.
Foreign Exchange Reserve Union: John Maynard Keynes and E.F. Schumacher conceptualised and proposed a supranational currency, the Bancor, and the International Clearing Union in 1942. The theory behind their proposal is different from the result, i.e., the US dollar standard supported by the establishment of the World Bank and the IMF.
During the Trump administration up to the beginning of 2021, a few developing countries had given up the hope that the US dollar centric forex reserve system works. Instead, those countries which do not enjoy seigniorage by funding IMF but their currencies are not included in SDR basket, started pointing out the unfairness of the existing foreign exchange reserve system.
In order for the CBDC platform can be most effective, there needs to be a fairer exchange mechanism between each fiat currency. This is especially true for those developing countries whose GDP and the money circulation is relatively small as the cost of exchange is inversely correlated to the size of GDP or international trades.
One solution for those developing countries to keep seigniorage and gain an economy of scale, is a foreign exchange reserve union. GVE has developed fairer reserve union framework which might be attractive to those countries.