Vlastimir Vuković

CBDC as a Solution for Billions of Unbanked People

Discussion Paper, No. 2, Central Bank Money Research, October 2021

(full PDF version)

        ‘Central Banks may bring about their own demise
       by incompetence; they will be comparatively
       immune to technological innovation.’
   Charles Goodhart (2000)


An eruption of CBDC projects was started in June 2019 when Facebook disclosed its intention to issue its own global stablecoin. Understandably, most central banks have been focusing on retail CBDC for public. After two years of pushing research and testing, deafening silence apparently occurred while expecting some tactical moves from the two most powerful central bank systems – Federal Reserve System and ECB Eurosystem. Due to divergent opinions and lack of clear objectives, one can make a conclusion that most of CBDC projects have lingered in a cul-de-sac
since then. However, central bank money for public cannot avoid its digital destiny, since the problem of a billion unbanked people all over the world needs a solution. Such a solution is CBDC as electronic transferable cash, similar to the newly launched Digital Bahamian Dollar. This is an efficient and straightforward solution, without imposing unbanked people transaction accounts with commercial banks (so called Basic Bank Account in EU and the UK or Free/Low-Cost Checking Account in the US). Anachronistic measures, such as obliging merchants to accept cash
(’cash rule’ in Denmark) would become redundant. More…

Key words: central banks, CBDC, means of payment, cash, transaction accounts, retail payments, PBOC, ECB, the Fed, Sand Dollar, unbanked/underbanked people, electronic transferable cash.

In honour of Henry Thornton,
the man who ‘knew everything’[1]


The illusion of paper money as ‘the dominant means of payment’

(full PDF version)

Discussion Paper, No. 1, Central Bank Money Research, October 2020

Vlastimir Vuković[2]

‘Once paper money became the dominant means of payment, coin never regained its prominence.’ O’Brien & Palma (2016)[3]

‘Bills, since they circulate chiefly among the trading world, come little under the observation of the public. The amount of bills in existence may yet, perhaps, be at all times greater than the amount of all the bank notes of every kind, and of all the circulating guineas.’ Henry Thornton (1802)[4]


From its first appearance to this day, paper money has been the subject of countless controversies and misconceptions. One of the most widely spread such misapprehensions, above all in the 19th century, has been the alleged dominance of paper money as a means of payment. In this view, paper money became dominant after it supplanted coins for day-to-day payments, and then deposit money broke this dominance in its turn. The misconception has endured to this day, as evidenced by numerous academic papers and many modern-day economics textbooks. Such an erroneous perception of the evolution of money and payment systems has had a major impact on the design of monetary measures, making them unsustainable in the long run. A misunderstanding of money is also evident in the increasingly lively debate on central bank digital currency (CBDC). This paper, therefore, will document and dispel the illusion that paper money was the dominant means of payment. Finally, the paper will explain on why banknotes were unable to assume a commanding position in payments in spite of their being the perfect form of money. More…

Key words: paper money, means of payment, banknotes, convertibility, coins, deposit money, check, payment system, clearing house, retail / wholesale payments, velocity, money evolution.