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Digital Innovation, Data Revolution and Central Bank Digital Currency

February 19, 2019
Noriyuki Yanagawa*1
Hiromi Yamaoka*2


Under the developments of digital innovation, global expansion of cashless payments and the emergence of crypto-assets, some argue that central banks should issue digital currencies that can be used by ordinary people instead of paper-based banknotes. The debates on central bank digital currencies are now gathering great attention from worldwide. Although many of major central banks, including the Bank of Japan, do not have an immediate plan to issue digital currencies that can replace banknotes, some central banks are seriously considering whether they should issue digital currencies in the near future or have already issued them as pilot studies. The debates on central bank digital currencies cover broad issues, such as their possible impacts on payment efficiency, banks' fund intermediation, liquidity crises and the transmission mechanism of monetary policy. All of these issues have important implications for the functions of money as well as its future. Digital innovation expands the possibility of money and enables new types of money with a variety of functions to emerge. These functions may include not only traditional payments but also processing various information and data attached to payments as well as executing transactions. In order to consider the pros and cons of central bank digital currencies as well as the future of money, it is needed to assess their possible impacts not only on payment efficiency but also on financial structure and the overall economy. It is also important to examine their impacts on effective utilization of data and the dynamics of "networks externality", which is one of major characteristics of payment infrastructure.

central bank digital currency, innovation, payment, negative interest rate

The views expressed in this paper are those of the authors and do not necessarily reflect the official views of the University of Tokyo or the Bank of Japan.

  1. *1Professor, University of Tokyo, Graduate School of Economics
    E-mail address:
  2. *2Bank of Japan, Institute for Monetary and Economic Studies
    E-mail address:


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