Digital currencies and fintech

• A central bank digital currency for offline payments

  Staff Analytical Note 2023-2 Cyrus Minwalla, John Miedema, Sebastian Hernandez, Alexandra Sutton-Lalani

  Offline functionality is a key consideration for a potential CBDC. We describe the different types of offline functionality based on their duration outside of network connection—either intermittent (for short periods) or extended (for longer periods). We discuss the advantages and drawbacks of each and consider implications for end-user devices, system resilience and universal accessibility.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Central bank research, Digital currencies and fintech JEL Code(s): E, E4, E42, E5, E51, E58, O, O3, O31

• On the Fragility of DeFi Lending

  Staff Working Paper 2023-14 Jonathan Chiu, Emre Ozdenoren, Kathy Yuan, Shengxing Zhang

  We develop a dynamic model to capture key features of decentralized finance lending. We identify a price-liquidity feedback: the market outcome in any given period depends on agents' expectations about lending activities in future periods, with higher future price expectations leading to more lending and higher prices in that period.

  Content Type(s): Staff research, Staff working papers Topic(s): Digital currencies and fintech, Financial stability JEL Code(s): G, G0, G01, G1, G10

• Central Bank Digital Currencies and Banking: Literature Review and New Questions

  Staff Discussion Paper 2023-4 James Chapman, Jonathan Chiu, Mohammad Davoodalhosseini, Janet Hua Jiang, Francisco Rivadeneyra, Yu Zhu

  We review the nascent but fast-growing literature on central bank digital currencies (CBDCs), focusing on their potential impacts on private banks. We evaluate these impacts in three areas of traditional banking: payments, lending and liquidity and maturity transformation. We also take a broader look at CBDCs and highlight two promising directions for future research.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Central bank research, Digital currencies and fintech, Financial institutions, Financial stability JEL Code(s): E, E5, E50, E58, G, G0, G00, L, L0, L00